The euro declined against the dollar and yen on concern Greece’s debt woes will raise borrowing costs for other countries in the region including Spain, which is due to sell bonds tomorrow. The euro weakened versus the yen for a fifth day after China’s Premier Wen Jiabao signaled developed nations should cut deficits and create jobs rather than relying on his country to bail out the world economy. The dollar held a two-day slide against Japan’s currency before reports that may show U.S. retail sales growth moderated in August, adding to signs of a slowing recovery. The Australian dollar dropped for a fifth day against the greenback. “Over the next week or two, the bias would be to the downside because you keep seeing a deterioration in sentiment,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “That’s pressuring the euro lower.” The euro traded at 104.75 yen as of 1:26 p.m. in Tokyo from 105.25 in New York yesterday. It reached 103.90 on Sept. 12, the lowest since June 2001. The shared currency fetched $1.3611 from $1.3678. The dollar was little changed at 76.94 yen from 76.96. The MSCI Asia Pacific index of stocks lost 1.9 percent. “Countries must first put their own houses in order,” Wen said today at the World Economic Forum in Dalian, China. He reiterated his message in June that China can offer “a helping hand” to Europe through investing there and called on the European Union and the U.S. to open their markets in return. Bond Sales Spain is scheduled to auction securities maturing in 2019 and 2020 tomorrow. Italy sold 3.9 billion euros ($5.3 billion) of five-year notes yesterday at an average yield of 5.6 percent, up from 4.93 percent at the previous auction. Demand dropped to 1.28 times the amount on offer, from 1.93 times. “The bigger elephant in the room is really what’s happening in Italy and Spain where you’re seeing their bond yields rise and getting close to levels where potentially it becomes impossible for them to fund themselves in the market,” Bank of New Zealand’s Burrowes said. Greek Prime Minister George Papandreou holds a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today to discuss developments in his nation and the euro area. Merkel, in a German radio interview broadcast yesterday, said that an “uncontrolled insolvency” would further roil markets spooked by the prospect of a Greek default. The euro region currently has no system for “orderly” insolvency until the permanent rescue fund is established in 2013, she said. Troika Returns The so-called troika of the International Monetary Fund, European Central Bank and European Commission representatives will return to Greece this week to review the nation’s economy, the German chancellor said. Following the review the team will make a recommendation on the release of the sixth tranche of loans under an international bailout secured in May of last year. Demand for the dollar against the yen was limited before reports that may indicate a slowing economy, boosting speculation the Federal Open Market Committee may add monetary stimulus at its Sept. 20-21 meeting. Federal Reserve policy makers will meet for two days this month, rather than the single day originally scheduled, to “allow a fuller discussion” of the economy and the central bank’s possible response, according to Chairman Ben S. Bernanke. U.S. advance retail sales rose 0.2 percent in August compared with a 0.5 percent advance in July, the median estimate of a Bloomberg News survey of economists showed ahead of Commerce Department figures today. The producer price index remained flat last month, after gaining 0.2 percent in July, according to a separate survey. Australian Inflation Australian’s currency weakened against all 16 of its major peers after the statistics bureau released new methodology for calculating seasonally adjusted inflation that indicated the Reserve Bank of Australia’s core measures may have been lower last quarter. Under the new settings, the trimmed mean consumer price index rose an estimated 0.7 percent in the second quarter, from the previous three months, and the weighted mean advanced 0.5 percent, the bureau said. It reported on July 27 the trimmed mean and weighted median each increased at a 0.9 percent quarterly pace. The methodology will be adopted in the third quarter and the bureau is scheduled to report CPI for the period on Oct. 26. “These are considered the RBA’s preferred measures of inflation and it’s something that may weigh on the Aussie as it heats up the argument that inflation is not such a significant issue now,” said Chris Weston, an institutional trader at IG Markets in Melbourne. The so-called Aussie fell to $1.0218 from $1.0312 yesterday, after earlier advancing as much as 0.6 percent. It slipped to 78.60 yen from 79.35. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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