Catarina Saraiva
December 13, 2011

The euro fell to an 11-month low against the dollar on concern European leaders won’t agree on ways to expand the region’s rescue capacities as debt-strapped nations struggle to fund their deficits.

The 17-nation currency dropped against most of its major counterparts after Chancellor Angela Merkel told German coalition lawmakers that the 500 billion euro ($654 billion) cap on Europe’s planned permanent bailout fund will stay in place, two officials with knowledge of the discussion said. The dollar declined against the yen before the Federal Reserve holds a meeting today amid speculation officials will maintain their pledge to keep borrowing costs at almost zero.

“You continue to see strains within the euro group,” said John McCarthy, managing director of currency trading at ING Groep NV in New York. “A division means a lower euro. The euro was already a little weaker and once we got convincingly through $1.3170, it dropped more.”

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