The euro weakened against the yen and dollar for the first time in five days amid unrest in Spain as Prime Minister Mariano Rajoy deliberated over whether to request economic assistance for the indebted nation. The 17-member currency fell versus most of its 16 major peers after European leaders disagreed last week at a meeting in Cyprus over the terms of bailouts and the role of the European Central Bank. Demonstrations two days ago in Madrid against fiscal cuts underpinned the political balancing act Rajoy faces as he seeks to pass more austerity measures. The Australian dollar weakened as demand for higher-yielding assets waned. “People are still waiting for news out of Spain and it’s essentially concern about when it will formally request a bailout,� said Chris Walker, a foreign-exchange strategist at UBS AG (UBSN) in London. The euro is weakening as “the market is taking a negative slant after Friday’s finance ministers’ meeting.� The euro fell 0.1 percent to 102.80 yen at 7:36 a.m. New York time, after rising to 103.02 yen on Sept. 14, the most since May 14. The shared currency slid 0.2 percent to $1.3110 after climbing to $1.3169 at the end of last week, the most since May 4. The dollar was little changed at 78.41 yen. ECB Policy Since July 26, when ECB President Mario Draghi said he would do “whatever it takes� to save the 17-nation euro, the currency has appreciated versus each of its 16 major counterparts tracked by Bloomberg. Draghi has shown a greater willingness than former ECB President Jean-Claude Trichet to use the Frankfurt-based central bank’s balance sheet to aid Spain and Italy, and he relaxed his predecessor’s insistence that senior bondholders at crippled banks shouldn’t suffer losses in bailouts. What European policy makers “have shown so far is their willingness to support the currency union and do as much as they can,� said Mary Nicola, a New York-based currency strategist at BNP Paribas SA. The euro touched a four-month high versus the dollar and the yen at the end of last week after a Federal Reserve decision to expand monetary stimulus boosted higher-yielding assets, undermining the U.S. currency. Leaders Meet The Dollar Index (DXY) rose 0.1 percent to 78.923 after weakening to the lowest since February last week. The index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, may pause its decline this week as it’s entering an “important� support zone, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co, wrote yesterday in a research note to clients. This area includes the 78.398 level that is the 50 percent retracement of its rise from 72.696 on May 4, 2011, to 84.100 on July 24, according to O’Connor. It also includes the May 1 low of 78.603. Rajoy travels to Rome for talks with Italian Prime Minister Mario Monti on Sept. 21. The next day, German Chancellor Angela Merkel will meet French President Francois Hollande at a commemoration in Ludwigsburg, Germany. Spanish Test Spain faces a test of investor sentiment this week when it auctions three- and 10-year debt on Sept. 20. Rajoy’s government will unveil new measures by the end of the month based on recommendations made in July, including a possible increase in the retirement age, shifting from labor to consumption taxes and deregulating closed professions, according to European officials. Spanish Economy Minister Luis de Guindos in Nicosia reaffirmed the country’s ambition to cut its deficit to 6.3 percent of gross domestic product this year from 8.9 percent. The euro has weakened 1.6 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes. The dollar fell 1.1 percent and the yen strengthened 6 percent. The Australian dollar fell 0.3 percent to $1.0517, after strengthening to $1.0625 on Sept. 14, the highest level since March 20. The so-called Aussie weakened even as the Reserve Bank of Australia said the country’s currency is held by as many as 23 national central banks, according to internal documents released today under a Freedom of Information Act request by Bloomberg News. To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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