By Yoshiaki Nohara and Ron Harui May 26 (Bloomberg) -- The euro fell against the dollar and yen for a third day as concern Europe’s debt crisis will slow economic growth damped demand for the region’s assets. The common currency dropped against 13 of its 16 major counterparts before reports forecast to show a drop in German consumer confidence and French consumer spending. South Korea’s won earlier rebounded from a 10-month low as an official said the nation will take steps to stabilize the currency after it plunged amid escalating tensions with North Korea. The Australian and New Zealand dollars declined as prices of commodities and equities slumped over the past month. “Rebuilding finances will take a long time,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “This is a structural problem, which may spread to other nations in the region. The euro is set to go down.” The euro fell to $1.2289 at 6:10 a.m. in London from $1.2345 in New York yesterday, when it touched $1.2178, the lowest since May 19. Europe’s currency dropped to 110.89 yen from 111.39. It slid to 108.84 yen yesterday, the least since November 2001. The dollar fetched 90.22 yen from 90.23. The euro has lost 6.9 percent this year, based on Bloomberg Correlation-Weighted Indexes. The dollar has risen 10.3 percent, and the yen has advanced 14.1 percent. An index of German consumer confidence will fall to 3.6 points in June from 3.8 points in May, according to the median estimate of economists in a Bloomberg News survey before GfK AG reports the data today. French spending on manufactured goods dropped 0.5 percent in April, according to another Bloomberg survey before national statistics office Insee’s data today. Monetary Fund The euro will remain in a long-term downtrend until the European Union creates its own monetary fund to expedite the rescue of heavily indebted nations, said Daisuke Karakama, a market economist at Mizuho Corporate Bank Ltd., Japan’s second- largest publicly traded lender in Tokyo. The EU’s 750 billion euro ($922 billion) bailout package announced May 10 has given policy makers time to start working toward such a fund, which would enable nations to pool resources to help struggling neighbors, Karakama said. The euro is likely to weaken to $1.10 by year-end as policy makers refrain from intervention until it reaches parity, he said. “The same kind of crisis will happen again unless the euro region has a system to transfer money smoothly from rich nations to poorer ones,” Karakama said. “Policy makers will have to show concrete steps toward fiscal unity to reverse the euro’s negative trend.” Korean Won South Korean Vice Finance Minister Yim Jong Yong said at an emergency meeting today that the nation will take prompt and active steps to stabilize the currency. The won slumped yesterday as tensions escalated between the two Koreas over the sinking of a warship from the South’s navy in March. North Korea said it will sever all ties with South Korea and expel the South’s workers from a joint industrial zone as “punishment” for accusing it of sinking a warship, killing 46 South Korean sailors. “News on North Korea will continue to affect the markets,” said Park Yong-il, a foreign exchange trader at DBS Bank Ltd. in Seoul. “The market overshot yesterday. It may calm down today.” The won was at 1,252.90 against the dollar from 1,251.10 yesterday, when it touched 1,277.85, the weakest since July 16. ‘Risk-Shedding Pressure’ The Reuters/Jefferies CRB Index of 19 commodities and the Standard & Poor’s 500 Index have declined about 11 percent over the past month, damping demand for the Australian and New Zealand dollars. “The commodity currencies are under risk-shedding pressure, but respecting their technical support levels for now,” Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender, wrote in a note. Australia’s currency dropped to 82.38 U.S. cents from 82.78 cents in New York yesterday. The currency fell to 74.35 yen from 74.69 yen. New Zealand’s dollar declined to 66.60 U.S. cents from 67.02 cents and slipped to 60.11 yen from 60.47 yen. The dollar rose against 13 of its 16 major counterparts before reports forecast to show U.S. durable goods orders and new home sales advanced in April, adding to signs the world’s largest economy is recovering. “The American economy is steadily picking up,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “This is supportive of the dollar.” U.S. durable goods orders gained 1.3 percent in April after dropping a revised 1.2 percent in March, according to the median estimate of economists in a Bloomberg survey before the data today in Washington. Sales of new homes in the U.S. rose 3.4 percent to an annual pace of 425,000, according to another Bloomberg survey before today’s data. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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