The euro weakened for a third day against the dollar, thelongest losing streak in almost a month, after data showed Europeanmanufacturing shrank and unemployment rose in Germany, adding toconcern the debt crisis will worsen.

The 17-nation currency dropped to a two-week low versus the yenon speculation European Central Bank President Mario Draghi willsignal tomorrow policy makers are moving closer to cutting interestrates to spur growth. The dollar erased gains against the yen afterprivate data showed U.S. companies added fewer workers thanforecast in April, boosting bets the Federal Reserve may keepaccommodative monetary policy in place longer.

“We have very bad purchasing-manager indexes and the first signthat Germany is cracking,” said Boris Schlossberg, director ofresearch at the online currency trader GFT Forex in New York. “Thegangrene has spread from the periphery to the core. If Draghi hintsthat there will be more easing to come, the euro may be vulnerableand fall to the $1.30 level.”

Europe's shared currency dropped 0.6 percent to $1.3153 at 10:28a.m. in New York in its longest series of daily losses since April5. The euro fell 0.6 percent to 105.38 yen and touched 105.13 yen,the lowest since April 16. The dollar was little changed at 80.13yen after appreciating as much as 0.7 percent earlier.

The euro dropped against most of its 16 major peers asLondon-based Markit Economics said its purchasing-manager index ofeuro-region manufacturing shrank for a ninth month, sliding to a34-month low of 45.9 in April from 47.7 in March. A reading below50 shows contraction.The number of people out of work in Germanyincreased a seasonally adjusted 19,000 last month to 2.87 million,the Nuremberg-based Federal Labor Agency said. Economists surveyedby Bloomberg forecast a decline of 10,000. Yields on Germany'stwo-, five-, 10-, and 30-year bonds dropped to record lows.

Draghi tomorrow may 'begin to hint that the outlook for theEuropean economy is clearly beginning to deteriorate again,” saidRobert Rennie, chief currency strategist at Westpac Banking Corp.in Sydney. “Within the next couple of months, the possibility offurther rate cuts from the ECB is rising.”

The central bank will keep its benchmark interest rate at arecord low 1 percent at tomorrow's meeting in Barcelona, accordingto all 58 economists surveyed by Bloomberg News.

If the euro weakens below $1.30 after the ECB's meetingtomorrow, it could trigger further depreciation as support levelsare breached, GFT Forex's Schlossberg said. Support is an area on achart where buy orders may be clustered.

Spain will auction three- and five-year notes tomorrow amidspeculation that the euro area's fourth-largest economy will followGreece, Ireland and Portugal in seeking a bailout. France andGreece hold elections on May 6.

The euro weakened 6.5 percent over the past 12 months, the worstperformance of the 10 developed-nation currencies tracked byBloomberg Correlation Weighted Indexes. The dollar climbed 6.4percent, and the yen appreciated 6.3 percent.

The Dollar Index briefly pared gains after a report showed U.S.companies added fewer jobs than forecast. Private employers'payrolls increased by 119,000 workers last month, after a revised201,000 gain in March, according to Roseland, New Jersey-based ADPEmployer Services. The median forecast of economists in a BloombergNews survey was for a 170,000 advance.

U.S. nonfarm payrolls added 160,000 jobs in April, up from120,000 the previous month, another Bloomberg survey showed beforethe Labor Department reports the data on May 4.

Orders to U.S. factories fell 1.5 percent in March, after arevised 1.1 percent gain in February, a Commerce Department reportshowed today.

While the Fed refrained at a two-day meeting last week from newactions to boost the economy, Chairman Ben S. Bernanke said it's“prepared to do more” if necessary. The central bank bought $2.3trillion of bonds in two rounds of quantitative easing fromDecember 2008 to June 2011 to lower borrowing costs. The DollarIndex fell 14 percent during that period.

Four U.S. central-bank officials have said they don't see a needto ease policy further as the economy expands. John Williams,president of the San Francisco Fed, joined his counterparts fromRichmond, Philadelphia and Atlanta yesterday in casting doubt onthe need for additional purchases of bonds to cap longer-terminterest rates.

The Dollar Index, which Intercontinental Exchange Inc. uses totrack the greenback against the currencies of six major U.S. rose0.4 percent today to 79.193 and reached 79.319, the highest levelsince April 24.

The yen dropped earlier versus the dollar after Moody'sInvestors Service said the role of lawmaker Ichiro Ozawa in Japan'stax reform talks may have an impact on the country's creditrating.

An increase in the country's consumption tax “is a significantissue that hasn't been resolved yet,” Tom Byrne, senior vicepresident at Moody's told reporters in Manila. “Ozawa's role in thedebate, there could be implications there, but right now we don'tsee anything.”

Bloomberg News