The euro approached the lowest level in almost three months against the dollar as Italy moved toward a new election and before data this week economists said will show the region’s economy shrank in the fourth quarter of 2012. Japan’s yen rose against all but one of its 16 major peers as China’s CSI 300 Index of equities dropped by the most in two years, boosting demand for haven assets. Australia’s dollar sank to an almost eight-month low against its U.S. equivalent after building approvals declined. European Central Bank policy makers, led by President Mario Draghi, will meet on March 7, while central banks from the U.K., Japan and Australia also announce policy decisions this week. “There’s a whole rash of reasons to be mindful,� said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “People are rationalizing where they want to be positioned throughout the mass of event risk this week and probably the way to play it is with a long- dollar bias. The ECB’s language will be monitored very closely.� The euro fell 0.2 percent to $1.2993 at 6:25 a.m. New York time, after touching $1.2967 on March 1, the lowest level since Dec. 11. The yen gained 0.3 percent to 121.50 per euro and was little changed at 93.50 per dollar. Italian Votes The euro weakened last week after Italy’s electorate revolted against outgoing Prime Minister Mario Monti’s austerity measures, handing the party of comedian-turned-politician Beppe Grillo more than 25 percent of the vote with its anti-spending cut message and a call for a referendum on euro membership. Italy’s Democratic Party leader Pier Luigi Bersani, whose coalition won the most votes in Italy’s inconclusive elections last month, said yesterday on state-owned RAI3 television that he would seek to form a government on his own rather than forming an alliance with his main rivals. Stefano Fassina, Bersani’s economic-policy spokesman, said yesterday on Sky TG24 that Italy may hold new elections within months if Bersani fails to win support in parliament. The 17-nation currency extended declines today after a report from Sentix research institute showed a measure of investor-confidence for the euro region fell more than expected this month. The euro area’s gross domestic product fell 0.6 percent in the fourth quarter from the previous three-month period, according to the median estimate of 37 economists surveyed by Bloomberg News before the data on March 6. Euro Weakness “What Europe is faced with is growth numbers that aren’t attractive, unemployment that’s getting worse and the Italian situation which remains unclear,� said Alex Sinton, director of institutional foreign exchange at Australia & New Zealand Banking Group Ltd. (ANZ) in Auckland. “The market really hasn’t got many reasons to turn the weakness in euro around.� Futures traders are betting the euro will drop against the dollar for the first time in seven weeks. Figures from the Washington-based Commodity Futures Trading Commission showed the difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, was 9,394 contracts in the week ended Feb. 26. The week before, large speculators held a net- long position of 19,103 contracts. The euro needs to weaken to between $1.10 and $1.15 to give “oxygen� to the European economy, French Industry Minister Arnaud Montebourg said in a Europe 1 radio interview broadcast yesterday. The shared currency has fallen 1 percent in the past month, the third-worst performer among 10 developed market currencies measured by Bloomberg Correlation-Weighted Indexes, after the pound and the Norwegian krone. Norway’s currency climbed at least 0.4 percent against all of its 16 major peers today. The dollar gained 3.4 percent in the past month, the best performer in the Bloomberg indexes. The Australian dollar fell today after an unexpected drop in home-building approvals in January added to speculation the Reserve Bank will cut interest rates this year. The so-called Aussie slid 0.6 percent to $1.0139, after falling to $1.0115, the weakest level since July 12. To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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