July 9 (Bloomberg) -- The euro fell to its lowest level in two years against the dollar before regional finance ministers gather in Brussels today to discuss crisis-fighting measures adopted by heads of government at a summit last month. The 17-nation currency erased its intraday drop as the European Commission said future recapitalizations of banks by rescue funds wouldn’t require government guarantees. The yen reached a one-month high versus the euro as stock declines boosted demand for haven assets. Australia’s dollar weakened after Chinese Premier Wen Jiabao said downward pressure on the economy is still “relatively large� and Japanese machinery orders had their biggest drop since 2001. “The euro group has to provide a lot of nuts and bolts to what had been decided at the European Union summit,� said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “If they decide something meaningful those who like it might buy euro-dollar up cautiously, but they will be disappointed as they had been last week by those who are more skeptical� pushing the currency lower. The euro slid to $1.2251, the weakest since July 2010, and was at $1.2298 at 7:06 a.m. New York time, little changed from the close on July 6. The shared currency bought 97.82 yen after earlier touching 97.43, the lowest level since June 5. Japan’s currency strengthened 0.2 percent to 79.54 per dollar. The Stoxx Europe 600 Index of shares lost 0.3 percent, while the MSCI Asia Pacific Index dropped 1.5 percent. Bank Loans Spanish and Italian bonds fell amid concern finance ministers will fail to agree on sufficient crisis-fighting measures to stem the euro area’s woes at today’s meeting. Recapitalizations of banks by the European Stability Mechanism will have “no need for a sovereign guarantee,� commission spokesman Simon O’Connor told reporters in Brussels today. Details of how the future system will work remain to be negotiated, he said. “We have to move quickly on banking supervision and we have to move quickly on the direct recapitalization of Spanish banks,� French Finance Minister Pierre Moscovici said yesterday. European Central Bank President Mario Draghi is scheduled to speak in Brussels after the central bank cut the main refinancing rate to a record 0.75 percent and lowered the deposit rate to zero on July 5. He said after last week’s decision that the cut may have only a “muted� economic impact and growth in the euro area “continues to remain weak with heightened uncertainty.� ‘Easing Bias’ Deutsche Bank AG, the biggest foreign-exchange trader according to Euromoney Institutional Investor Plc, forecasts the euro will drop to $1.20 in the coming months. Last week’s rate cut “implicitly signals a greater ECB easing bias and a desire for a lower euro,� George Saravelos, a currency strategist in London, wrote in an e-mailed report dated July 6. The deposit-rate cut will help “to push euro-dollar down toward 1.20 over the summer months,� he wrote. The euro earlier slid to the lowest against the Australian and New Zealand dollars since the 17-nation currency was created in January 1999, dropping to A$1.20053 and NZ$1.5356. It fell to a two-year low versus the Canadian dollar of 1.24657 and the weakest level since November 2008 against the pound at 79.04 pence. Machinery Orders Europe’s shared currency reached $1.1877 on June 7, 2010, the weakest since 2006, according to data compiled by Bloomberg. The euro has fallen 3.3 percent in the past three months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest gainer in the period, rising 6.5 percent followed by a 3.7 percent increase in the dollar.

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