The euro dropped to its lowest level this month against the dollar as the European Union struggled to break a deadlock on a second Greek rescue. Taiwan’s dollar was the best performer versus the shared European currency on speculation its central bank will raise interest rates to contain inflation. Sterling fell versus the dollar after a report showed Britain’s jobless claims rose in May more than economists forecast. A U.S. report today is forecast to show inflation slowed. “There’s still a lot of uncertainty about how the Greek debt issue will be resolved, and that’s putting some pressure on the euro,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “The main problem is how to involve the private bondholders in a new rescue package. We’re still pretty confident a solution will be found, and once that happens, it should be positive for the euro.” The euro fell 0.9 percent to $1.4310 at 7:41 a.m. in New York, from $1.4440 yesterday, after touching $1.4293, the lowest level since May 31. The currency slid 0.7 percent to 115.41 yen, from 116.23. The dollar gained 0.2 percent to 80.68 yen, from 80.49, after touching 80.76, the highest level since June 3. Europe’s currency has depreciated 1.1 percent in the past week against nine other developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has risen 1.1 percent. Merkel Versus Sarkozy German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece. Standard & Poor’s lowered Greece’s credit rating on June 13 to the lowest among nations. EU finance ministers agreed yesterday to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new plan for Greek aid. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default. Greece will never repay all of its debts, and the euro’s structure has a “fatal flaw,” said Jim Conklin, head of investment research at FX Concepts, at a London conference. Sterling weakened as the Office for National Statistics reported that the U.K.’s jobless claims rose by 19,600 in May from a revised 16,900 increase in the prior month. The median forecast of 22 economists in a Bloomberg News survey was for an increase of 6,500. The pound lost 0.6 percent to $1.6282. U.K. Sentiment U.K. consumer confidence jumped the most in 5 1/2 years in May as Britons became less pessimistic about spending and the extra public holiday for the royal wedding led to a “feel-good factor,” Nationwide Building Society said. Nationwide’s index of sentiment gained 11 points to 55, the highest in five months. The pound touched 87.94 pence per euro, a two-week high. Australia’s dollar erased its drop after Reserve Bank of Australia Governor Glenn Stevens signaled inflation figures next month may be essential to the timing of an interest-rate increase, boosting bets that borrowing costs will advance. “New information will, as always, be important in our monthly assessments of what monetary policy needs to do,” Stevens said in prepared remarks today in Brisbane, the capital of Queensland. “As far as prices are concerned, we will get another comprehensive round of data in late July.” The Aussie was little changed at $1.0682 after appreciating 0.3 percent. The currency rose 0.2 percent to 86.19 yen. Inflation in U.S. In the U.S., the consumer-price index increased 0.1 percent in May after a 0.4 percent gain in the previous month, according to the median forecast of 79 economists in a Bloomberg News survey before today’s report from the Labor Department. “If there’s any sign that CPI is weakening a little bit, that would probably be dollar-negative,” said Gareth Berry, a foreign-exchange strategist at UBS AG in Singapore. Taiwan’s dollar advanced 0.6 percent to NT$41.4240 versus the euro. Against its U.S. counterpart, it was little changed at NT$28.824. China increased yesterday the reserve-requirement ratio for banks, spurring speculation Taiwan’s policy makers will raise borrowing costs this month. Taiwan’s inflation accelerated to 1.66 percent last month, the fastest pace since February 2010, a report showed on June 7. “China’s tightening move supports the idea Taiwan will raise rates to rein in prices too at the end of this month,” said Henry Lin, a foreign-exchange trader at Taiwan Shin Kong Commercial Bank in Taipei. “That supports the Taiwan dollar.” To contact the reporters on this story: Garth Theunissen in London gtheunissen@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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