NEW YORK (Bloomberg) The euro fell against most of its major counterparts as leaders from Germany and France said they are against increased funding to quell the sovereign-debt crisis before next week’s summit of European Union leaders.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, in talks on Friday, said they oppose increasing the European Union’s 440 billion-euro ($581 billion) rescue fund and rejected joint euro-area bonds. The dollar gained against the euro and yen after exports from the US rose to a two-year high in October. The Australian dollar posted a weekly drop against the greenback on speculation China will tighten monetary policy.

“The bias here for the euro is still lower next week,” said Eric Viloria, a senior currency strategist at Gain Capital in New York. “Merkel has certainly been very vocal on the stability mechanisms. Rather than talking about what it needs to be like in the future, they need to take a look at the situation now and resolve this issue.”

The euro was set for a 1.4 percent decline against the dollar this week. It fell 0.2 percent to $1.3239 at 5:03pm in New York. On Friday it touched $1.3165, the lowest since December 2. The common currency fell the most versus Norway’s krone, dropping 0.6 percent to 7.9458, and was little changed at 110.98 yen. The dollar rose 0.3 percent to 83.76 yen.

Merkel said that there are “structural weaknesses” in the euro region that must be addressed. Merkel held talks today with Sarkozy in Freiburg, Germany, before a December 16-17 European Union summit.

The leaders of the euro-area’s two largest economies said the continued existence of the common currency is “non-negotiable”.

“If the euro fails, Europe fails,” Merkel said.

European Central Bank vice-president Vitor Constancio late on Friday signalled European governments should be ready to increase the size and flexibility of their bailout fund as the ECB urges leaders to do more to fight the fiscal crisis.

Merkel said she is against increasing the size of the fund and sharing public debt with the euro zone, saying that European leaders would do what is necessary to defend the euro.

Europe’s sovereign debt crisis took hold at the end of 2009 after a new government in Greece said the budget deficit was twice as big as the previous administration disclosed. The region’s nations assembled a rescue fund in May, which Greece and Ireland have tapped.

Spanish and Italian government bonds fell, increasing the additional yield investors demand to hold the securities instead of benchmark German bunds, amid concern government borrowing costs will rise at debt sales next week.

The euro may decline as low as 108 yen should it break below a key support level against the Japanese currency, Societe Generale said, citing technical indicators in a research note on Friday. A support level is an area on a chart where technical analysts anticipate orders to buy a currency and its related instruments. The stronger the support, the more selling is needed for a drop below that level.

The dollar has fallen 1.1 percent this year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 9.5 percent so far this year and 2.1 percent in the past month. The yen is up 10.8 percent on the year and up 0.2 percent in the past 30 days.

The trade deficit in the US shrank more than forecast in October as a weaker dollar and growing economies overseas propelled exports to a two-year high. The gap narrowed 13 percent to $38.7 billion, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January, Commerce Department figures showed.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose in December to 74.2, the highest since June, from 71.6 at the end of last month.

“That’s very good news for the US economy and for the dollar if it’s sustained,” said Greg Anderson, a currency strategist at Citigroup Inc. in New York. “If US yields hold where they’ve moved to this week, then the dollar ought to rally.”