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Nov. 13 (Bloomberg) -- The euro fell to a two-week low against the dollar after Germany's economy entered its worst recession in at least 12 years, spurring speculation the European Central Bank will cut interest rates.

The 15-nation currency also pared gains against the yen after a German government report showed the biggest contraction over two consecutive quarters since 1996. The yen declined versus the Australian dollar, after yesterday surging the most in three weeks, as currency intervention by the Reserve Bank of Australia fueled speculation other central banks may follow suit.

``Economic data from Europe are weighing on the euro,'' said Tadahiko Nashimoto, director of foreign exchange at Barclays Bank Plc in Tokyo. ``There could be more demand to sell the currency as Europe-based traders enter the market.''

The euro fell to $1.2389, the lowest since Oct. 28, and traded at $1.2429 at 8:16 a.m. in London from $1.2505 late yesterday in New York. It traded at 119.14 yen, paring an earlier advance to 120.05 yen. The yen fell to 95.90 per dollar from 95.01.

Germany's gross domestic product contracted 0.5 percent in the third quarter after shrinking 0.4 percent in the previous three-month period, the Federal Statistics Office in Wiesbaden said today. A common definition of a recession is two consecutive quarters of a contraction in GDP.

Weaker Euro

Traders increased bets the ECB will reduce its 3.25 percent rate in the first quarter. The implied yield on Euribor futures contracts expiring in March fell to 2.70 percent from 3.15 percent at the end of last month. The ECB benchmark is 0.39 percentage point higher than the Euribor contract yield, compared with a 12-month average of 0.19 percentage point below the futures rate.

The Australian dollar climbed to 64.18 U.S. cents, recovering from an earlier low of 63.60 cents, after an RBA spokesman confirmed the central bank bought its own currency today.

The Aussie, as the currency is known, rose 0.9 percent from the New York close to 61.36 yen. The New Zealand dollar gained 0.3 percent to 53.48 yen. Central banks intervene in foreign exchange markets by arranging purchases and sales of currencies.

``The RBA's intervention is most likely designed to prevent hectic moves in the market,'' said Kimihiko Tomita, head of foreign exchange in Tokyo at State Street Bank & Trust Co., a unit of the world's largest money manager for institutions. ``The initial reaction is that people will be reluctant to sell other currencies for yen.'