The euro fell versus the dollar and yen on speculation an economic slowdown in the region will pressure the European Central Bank to consider cutting interest rates. The greenback strengthened against most of its 16 major counterparts after a Chinese manufacturing index dropped and Asian stocks fell, boosting demand for the refuge of the world’s reserve currency. The yen was little changed versus the dollar on prospects Japan is ready for sustained intervention to prevent gains in its currency that threaten an export-led recovery. The Australian dollar declined after the central bank cut its benchmark interest rate. “It certainly is a worry just how weak the European economy is,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. A European interest-rate cut “may happen next year. In the short term, you could certainly see euro falling further towards the $1.35 region.” The euro dropped 0.4 percent to $1.3806 as of 6:18 a.m. in London from yesterday in New York, when it sank 2 percent, the sharpest slide since August 2010. The 17-nation euro slipped 0.5 percent to 107.82 yen. The dollar was at 78.11 yen from 78.17 yesterday when it touched 79.53, the highest since Aug. 4. The Australian dollar slid 0.9 percent to $1.0436 and 1 percent to 81.49 yen. The MSCI Asia Pacific Index of shares lost 1.6 percent. Manufacturing Index A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 47.3 in October from 48.5 in September, London-based Markit Economics is forecast to say tomorrow, according to the median estimate in a Bloomberg News poll of economists. That would be in line with an Oct. 24 initial estimate. A reading below 50 indicates contraction. Six of 54 economists said in a separate Bloomberg survey that the ECB will lower its main interest rate by at least 25 basis points, or 0.25 percentage point, at its meeting on Nov. 3. A Credit Suisse Group AG index based on swaps yesterday showed traders estimated the ECB will cut its benchmark rate by 26.1 basis points over the next 12 months, compared with wagers on 11.1 basis points of increases on July 29. Greece’s Prime Minister George Papandreou pledged to hold a referendum on the European Union’s latest bailout plan for the nation, days before Group of 20 leaders gather Nov. 3-4 for a summit in Cannes, France, to discuss the debt crisis. He also told lawmakers he’ll seek a vote of confidence in parliament. The referendum on the EU accord, which called for a 50 percent writedown on Greek debt as well as an expansion of the region’s bailout fund, will likely be held after details are wound up, Papandreou said. Yen Intervention The yen maintained the decline from yesterday which occurred after Japan stepped into the currency markets. Japan’s Finance Minister Jun Azumi told reporters in Tokyo today the government will continue to take appropriate action on the currency. Credit Suisse Group AG analysts estimated the value of yesterday’s market operations may have exceeded $50 billion. The intervention was the first since August, when Japan spent 4.51 trillion yen ($57.7 billion) seeking to stem the currency’s surge to a postwar high against the dollar. “If you can convince the market you’re there and you’ll pounce if they try pushing dollar-yen lower, that is often enough,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “It’s a credible deterrent to those who want to buy yen.” Safety Demand Demand for the dollar was boosted after a report indicated a slowdown in Chinese manufacturing, spurring appetite for safer assets. China’s Purchasing Managers’ Index fell to 50.4 from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That compared with the median estimate of 51.8 in a Bloomberg survey of economists. “Risk aversion will prevail over the next few months and that should benefit the U.S. dollar,” Speizer said. “If investors want to now buy a major currency during a risk averse period, there’s only one left and that’s the U.S. dollar.” The dollar has appreciated 4.9 percent in the past three months, the best performer among the 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes. The Australian dollar slumped versus its U.S. and Japanese counterparts after the Reserve Bank of Australia lowered its cash rate target by 25 basis points to 4.5 percent. That’s the first cut since April 2009. Sixteen of 27 economists surveyed by Bloomberg News predicted the move; the rest forecast no change. “Recent information suggests the subdued demand conditions and the high exchange rate have contained inflation,” Governor Glenn Stevens said in a statement today. “With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2 percent to 3 percent inflation over time,” he said. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net `

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