The euro fell the most in two months against the dollar before European reports that economists said will show services and manufacturing shrank this month, adding to evidence the debt crisis is sapping growth. The 17-nation currency dropped for a third day versus the yen after French factory output contracted the most since April 2009. The yen and the dollar strengthened against most of their major counterparts after data showed China’s manufacturing and Japanese exports declined, spurring demand for safer assets. Australia’s dollar and South Africa’s rand led declines among higher-yielding currencies. “One of the big problems that remains unresolved in the euro area is a lack of growth,� said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.� The euro dropped 0.6 percent to $1.2969 at 8:30 a.m. in London after falling as much as 0.8 percent, the biggest decline since July 20. The shared currency tumbled 0.8 percent to 101.44 yen. The yen strengthened 0.2 percent to 78.20 per dollar. A euro-zone composite index for services and manufacturing industries was at 46.6 in September, from 46.3 the prior month, according to the median estimate of economists surveyed by Bloomberg News before London-based Markit Economics releases the figure today. Readings below 50 signal contraction. “At these levels, euro is a sell� because of the state of the European economy, said Joseph Capurso, a strategist at Commonwealth Bank of Australia (CBA) in Sydney. “The economy is going to get worse before it gets better in Europe.� The Australian currency dropped 0.8 percent to $1.0394. South Africa’s rand fell 1 percent to 8.3527 per dollar. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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