The euro weakened for a second day, falling to an 11-year lowagainst the yen, as France prepared to sell bills after Standard& Poor's stripped the nation of its top credit rating and cuteight other euro-region nations.

Japan's currency gained against all 16 of its major peerstracked by Bloomberg as concern that Europe's fiscal turmoil willintensify boosted demand for haven assets. Greek officials willreconvene with creditors on Jan. 18 after discussions stalled lastweek over the size of investor losses in a proposed debt swap.Asian currencies weakened before a report tomorrow that may showChina's economy expanded at the slowest pace since the secondquarter of 2009.

“The ratings downgrade provides more evidence that the euro-zonesovereign debt crisis has a lot further to run,” said Lee Hardman,a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. inLondon. “The fundamentals still argue in favor of a continuedadjustment lower in the euro.”

Europe's shared currency was 0.3 percent weaker at 97.26 yen at8:14 a.m. in New York, after falling to 97.04, the least sinceDecember 2000. The euro was little changed at $1.2676, afterdropping to $1.2626. The dollar dipped 0.3 percent to 76.73 yen.U.S. markets are closed today for a holiday.

The euro dropped on Jan. 13 amid reports of imminent ratingscuts before S&P lowered the top grades of France and Austriaone level to AA+, with “negative” outlooks. The company affirmedthe ratings of countries including Germany, Belgium and theNetherlands and downgraded Italy, Portugal, Spain and Cyprus by twosteps and Malta, Slovakia and Slovenia by one level.

“There are a lot of risks to the euro, including the Greek debttalks,” said Chris Walker, a currency strategist at UBS AG inLondon. “The ECB has come in earlier than they usually do, andthat's stabilizing things a bit. We still see euro-dollar grindinglower.”

The ECB bought Italian and Spanish government bonds today,according to four people with knowledge of the transactions, whodeclined to be identified because the deals are confidential.

France will issue as much as 8.7 billion euros ($11 billion) inbills today. The European Financial Stability Facility, theeuro-region bailout fund, is scheduled to sell 1.5 billion euros ofbills tomorrow, while Greece and Spain also offer bills. Portugalwill sell bills on Jan. 18.

'Nervous' Market

“Markets are going to remain pretty nervous” until we see theresults of European debt auctions this week, said Michael Turner, afixed-income strategist in Sydney at Royal Bank of Canada. “The yenand the dollar should outperform.”

Italy's government must refinance about 341 billion euros ofsecurities coming due this year, with another 54 billion euros ininterest payments, data compiled by Bloomberg show. France has 266billion euros in debt coming due, plus 39 billion euros ininterest, while Germany needs to find 193 billion euros forprincipal repayments and 22 billion euros for interest.

Talks between Greece's Prime Minister Lucas Papademos, FinanceMinister Evangelos Venizelos, and Charles Dallara, the managingdirector of the Institute of International Finance, whichrepresents private creditors, will resume Jan. 18, according to aGreek Finance Ministry official who declined to be identified.Greece's creditor banks last week broke off talks after failing toagree with the government about how much money investors will loseby swapping their bonds.

Futures traders increased bets to a record that the euro willweaken against the dollar. The difference between wagers that theshared currency will fall versus those that it will rise surged to155,195 in the week ended Jan. 10, data from the Commodity FuturesTrading Commission showed on Jan. 13.

“Those downgrades provided another excuse for the speculativecommunity to add to their short positions in euro,” said MikeJones, a currency strategist at Bank of New Zealand Ltd. inWellington. “We've got a few more European debt auctions out thereas market sentiment continues to be tested.” A short position is abet that an asset will decline in value.

The euro has depreciated 1.7 percent this month, the worstperformance among the 10 developed-nation currencies tracked byBloomberg Correlation-Weighted Indexes. The dollar advanced 0.8percent over the same period, while the yen gained 1 percent.

Yen's Range

The yen will trade in a range from 72 to 79 per dollar for thenext six months, former Japanese Finance Ministry official EisukeSakakibara said. Intervention in the currency market will only workwith U.S. cooperation, he said today at the Foreign Correspondents'Club of Japan in Tokyo. Japan's government intervened in theforeign-exchange market at least three times last year to keep theyen's gains from hobbling the country's recovery.

The yen rose 5.2 percent against the dollar last year, after a13 percent gain in 2010.

Canada's dollar rose all but two of its 16 major peers onspeculation its exports will benefit from accelerating U.S.economic growth. Regional reports from the New York Fed on Jan. 17and the Philadelphia Fed on Jan. 19 may show manufacturingcontinued to pick up in January, according to economistsurveys.

The currency, nicknamed the loonie, strengthened 0.3 percent toC$1.0205 per U.S. dollar. One Canadian dollar buys 97.99 U.S.cents.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.