The euro dropped from a one-month high against the dollar as forecasts for a deepening slump in the 16- nation region bolstered the case for policy makers to cut interest rates this week. The currency fell against the New Zealand dollar and pound after the European Commission said yesterday the economy will shrink 4 percent this year, more than twice the contraction projected in January. The Australian dollar rose to the highest level against the greenback since October after the Reserve Bank held the target lending rate at 3 percent. “The euro’s poor performance reflects uncertainty over the outcome of the European Central Bank’s policy meeting this week,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “Policy makers are likely to cut the interest rate by 25 basis points, but some investors are concerned that they may be more aggressive, that they may opt for quantitative easing rather than just tweaking liquidity measures.” The euro traded at $1.3383 at 7:58 a.m. in New York, compared with $1.3406 yesterday, after advancing to $1.3438, the highest level since April 6. The dollar was little changed at 98.86 yen, compared with 98.80. The euro traded at 132.37 yen, compared with 132.45.

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