The euro fell against the dollar as European CommissionPresident Jose Barroso said the region is facing a “truly systemiccrisis.”

The 17-nation currency pared declines from a five-week low afterthe European Central Bank was said to be buying Spanish and Italiangovernment bonds, narrowing their yield gap over benchmark Germanbunds. The pound fell for a third day against the dollar as U.K.unemployment increased and joblessness among young people climbedabove 1 million for the first time since at least 1992. The DollarIndex gained for a third day as European stocks fell, boostingdemand for the U.S. currency as a haven.

“Each day that goes by the situation is getting worse, and it'sinevitable under those circumstances that the currency comes underpressure,” said Derek Halpenny, European head of currency researchat Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There'sunbelievably difficult decisions that lie ahead for Europe in termsof resolving this crisis.”

The euro fell 0.3 percent to $1.3498 at 7:19 a.m. New York time,after dropping to $1.3429, the weakest level since Oct. 10. Theshared currency declined 0.4 percent to 103.84 yen after weakeningto 103.41 yen. Japan's currency strengthened 0.1 percent to 76.94versus the dollar.

Europe's economic recovery has hit a standstill, Barroso saidtoday at the European Parliament in Strasbourg, France. There is“no way out of the crisis” without economic growth in Europe, hesaid.

U.K. Unemployment

The ECB bought larger-than-usual sizes and quantities of theItalian debt, said two people with knowledge of the trades, whodeclined to be identified because the deals are private. Centralbank press officers couldn't immediately be reached for commentwhen called by Bloomberg News.

The euro has dropped 1.5 percent over the past six months,according to Bloomberg Correlation-Weighted Indexes. The yen hasgained 7.5 percent and the dollar has risen 3.5 percent, the bestperformers among the 10 developed-nation peers tracked by thegauge.

Europe's single currency also slid on speculation that so-called stop-loss orders were activated once it breached $1.35overnight, Kit Juckes, head of foreign-exchange strategy at SocieteGenerale SA in London, wrote in a client note today.

Euro 'Resilience'

“The euro's resilience in the face of the crisis envelopingEurope is in danger of collapsing,” Juckes wrote. “Technically, thebreak of $1.3485 opens the way for a re-test of the early Octoberlow at $1.3145. Psychologically, it is much worse.”

IntercontinentalExchange Inc.'s Dollar Index, which it uses totrack the greenback against the currencies of six major U.S.trading partners, increased 0.4 percent to 78.230. The gauge isweighted 57.6 percent to movements in the euro.

The benchmark Stoxx Europe 600 Index dropped 0.5 percent andfutures on the Standard & Poor's 500 Index expiring in Decemberfell 1.1 percent. The MSCI Asia Pacific Index retreated 1.3 percenttoday.

The pound depreciated versus the dollar as the Bank of Englandsaid Britain faces a “markedly weaker” outlook for economic growth,signaling it may expand stimulus.

Growth may be “broadly flat” in the first half of 2012, centralbank Governor Mervyn King said in a press conference after thequarterly Inflation Report.

The pound also fell after the Office for National Statisticssaid British unemployment rose the most since 2009, with the rateclimbing to a 15-year high of 8.3 percent and joblessness amongyoung people reached more than 1 million for the first time sinceat least 1992.

The pound weakened 0.1 percent to $1.5804 after being as low as$1.5745, the least since Oct. 20. It strengthened 0.2 percent to85.43 pence per euro.

Bloomberg News

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