The euro fell against the dollar as European Commission President Jose Barroso said the region is facing a “truly systemic crisis.”

The 17-nation currency pared declines from a five-week low after the European Central Bank was said to be buying Spanish and Italian government bonds, narrowing their yield gap over benchmark German bunds. The pound fell for a third day against the dollar as U.K. unemployment increased and joblessness among young people climbed above 1 million for the first time since at least 1992. The Dollar Index gained for a third day as European stocks fell, boosting demand for the U.S. currency as a haven.

“Each day that goes by the situation is getting worse, and it's inevitable under those circumstances that the currency comes under pressure,” said Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There's unbelievably difficult decisions that lie ahead for Europe in terms of 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. The shared currency declined 0.4 percent to 103.84 yen after weakening to 103.41 yen. Japan's currency strengthened 0.1 percent to 76.94 versus the dollar.

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

U.K. Unemployment

The ECB bought larger-than-usual sizes and quantities of the Italian debt, said two people with knowledge of the trades, who declined to be identified because the deals are private. Central bank press officers couldn't immediately be reached for comment when called by Bloomberg News.

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

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

Euro 'Resilience'

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

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

The benchmark Stoxx Europe 600 Index dropped 0.5 percent and futures on the Standard & Poor's 500 Index expiring in December fell 1.1 percent. The MSCI Asia Pacific Index retreated 1.3 percent today.

The pound depreciated versus the dollar as the Bank of England said 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, central bank Governor Mervyn King said in a press conference after the quarterly Inflation Report.

The pound also fell after the Office for National Statistics said British unemployment rose the most since 2009, with the rate climbing to a 15-year high of 8.3 percent and joblessness among young people reached more than 1 million for the first time since at 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 to 85.43 pence per euro.

Bloomberg News

Instant Insights /

Euro Hits Five-Week Low

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