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The euro touched a two-week low against the dollar before data economists say will show the region’s retail sales dropped for a third month, adding to signs the currency bloc’s debt woes are hurting the economy.

The Dollar Index advanced to the highest in more than two weeks before a U.S. report that may point to a continued expansion in service industries, easing speculation the Federal Reserve will add to monetary stimulus. Australia’s dollar slid against the yen after its biggest trading partner China said it will aim for slower growth this year.

“The euro is likely to weaken in the mid- to long-term,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s No. 3 bank by market value. “It’s hard to imagine the European economy being on a sustainable growth path as countries in the region are forced to take austerity measures because of the debt crisis.”

The euro slid to $1.3181, the lowest since Feb. 20, before trading little changed at $1.3205 as of 11:22 a.m. in Tokyo. It lost less than 0.1 percent to 107.90 yen. Japan’s currency strengthened 0.1 percent to 81.71 per dollar after earlier falling to 81.87, matching the weakest level since May.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the U.S. currency against its six major counterparts, reached 79.481, the highest since Feb. 17, before trading little changed at 79.402.

Euro-area retail sales probably declined 0.1 percent in January from the previous month when they fell 0.3 percent, a Bloomberg News survey of economists showed before data from the European Union’s statistics office today. The European Central Bank (EURR002W) will keep its benchmark interest rate at a record low 1 percent on March 8, according to a separate survey.

U.S. Economy
The Institute for Supply Management’s non-manufacturing index was at 56.2 last month, according to another survey before the report from the Arizona-based group today. The gauge for U.S. service industries was 56.8 in January, which was the highest since February 2011 and above the 50 level that signals expansion.

Fed Bank of Dallas President Richard Fisher speaks today about the economy. He said on Feb. 29 that policy makers “worry less about a double-dip recession.” The central bank, which will meet March 13, bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from December 2008 to June 2011.

“Good U.S. data makes it less likely that the Fed will do quantitative easing” again, said Alvin Liew, a senior economist at United Overseas Bank Ltd. (UOB) in Singapore. “That would keep the dollar fairly well supported at least in the near term.”

The dollar has advanced 4.1 percent in the past six months, while the euro has lost 2.9 percent, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The yen slid 4.3 percent.

Yen Bets
Futures traders are betting for the first time since May that the yen will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 1,203 on Feb. 28, compared with net longs of 17,257 a week earlier.

Australia’s dollar failed to extend a three-day gain versus the yen amid concern slower growth in China’s economy will decrease demand for the South Pacific nation’s commodities.

China’s government will target economic growth of 7.5 percent this year, the lowest goal since 2004, according to a state-of-the-nation speech from Premier Wen Jiabao to lawmakers in Beijing today.

Australia’s currency dipped 0.2 percent to $1.0715 after falling 0.7 percent on March 2. It fell 0.3 percent to 87.55 yen.