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Euro Turns Carry Traders’ Favorite in Worst Year Since 2003

The euro’s strength against the U.S. dollar in the face of the region’s three-year banking and sovereign-debt crisis masks a nine-year low against other currencies, suggesting more weakness to come.

The 17-nation currency is at the lowest level since 2003 on a trade-weighted basis, according to a Deutsche Bank AG index that includes the yen, pound and Swiss franc. The European Central Bank’s July 5 reduction of its deposit rate to zero spurred investors to borrow euros to buy higher-yielding assets elsewhere, generating gains from the carry-trade for the first time in two years.