March 25 (Bloomberg) -- The euro slumped against the dollar as European Union leaders cut the startup capital for a program for future emergency aid, stoking concern about government's efforts to quell the debt crisis. The shared currency fell from almost its highest level in four months against the U.S. currency as a major European clearinghouse said Portuguese government bonds will no longer be eligible as collateral in certain transactions. New Zealand's currency touched the highest in almost a month against the dollar as Reserve Bank Governor Alan Bollard said the nation's economy will get a boost next year. The yen pared losses versus the dollar after falling as much as 0.5 percent. "It's not a dollar move as much as it's a risk-off move," said Tim O'Sullivan, chief trader at FOREX.com, a unit of the online currency trading company Gain Capital in Bedminster, New Jersey. "The major concern right now is if Spain is the next one we should look for to get a package and how is that going to affect risk, euro-yen. The market is still jittery in this environment." The euro fell 0.3 percent to $1.4135 at 9:38 a.m. in New York, from $1.4177 yesterday. It dropped 0.1 percent against the yen to 114.68, from 114.79. The yen dropped to 81.12 per U.S. dollar, after weakening as much as 0.5 percent. The Dollar Index, which tracks the greenback against six major trading partners, rose 0.3 percent to 75.871, from 75.656. The gauge is weighted 57.6 percent to movements in the euro. EU Moves The EU leaders pared the fund's paid-in capital as of 2013 to 16 billion euros ($23 billion), less than the 40 billion euros foreseen in a March 21 accord. German Chancellor Angela Merkel said it will take the euro years to recover from the "sins of the past." While the euro passed its "first big test," debt levels across the euro region mean governments will have to "deal with our homework for many years to come," said Merkel, speaking to reporters in Brussels today after a European Union summit. LCH Clearnet Ltd., Europe's biggest clearing house, said Portuguese government bonds will no longer be eligible for delivery in any of its RepoClear euro general collateral baskets after the nation's debt was downgraded by Standard & Poor's. The exclusion takes effect from Monday, LCH said in a statement on its website. Market Focus "The European debt situation is still the main focus for the markets," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. "The yen is still borderline dysfunctional. The market for yen last week prior to the intervention by the G-7 became very dysfunctional." The yen headed for a 0.7 percent weekly loss versus the dollar and a 0.2 percent decline against the euro, in the week following the Group of Seven nations sale of yen to weaken the currency and support Japan's recovery from its earthquake. "The market is cautious on dollar-yen and it doesn't seem like people are trying to test the central banks," said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. "The dollar-yen seems to be locked in a little bit of a range between 81.50 and 80.50." Japanese investors bought more foreign assets than they sold from March 13 to 19, the Finance Ministry said in a report in Tokyo today. Purchases of foreign assets, including bonds and notes, exceeded sales by 291 billion yen, the report showed. New Zealand's dollar rose to its highest level in more than three weeks after Bollard said the economy will grow from "a very big" construction boom after earthquakes struck Christchurch. "There is some good resistance in the kiwi to the Feb. 28 high at 75.55," said Andrew Chaveriat, a New York-based technical analyst at BNP Paribas SA. The kiwi gained 0.6 percent to 75.33 U.S. cents after touching 75.38 U.S. cents, the highest level since Feb. 28. The New Zealand dollar has risen 3 percent this week, the biggest five-day gain this year. Australia's dollar advanced 0.2 percent to $1.0233, extending its gain this week to 2.9 percent. --With assistance from Emma Charlton and Keith Jenkins in London and Alexandra Harris and Catarina Saraiva in New York. Editors: Paul Cox, Dave Liedtka

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