LONDON: The euro traded near a seven-week low against the dollar on Monday as investors sought clarity over how fresh talks on further aid for struggling euro zone states might pan out.
The euro skidded to lowest levels since late March at $1.4048 in Asian trade as news that IMF chief Dominique Strauss-Kahn had been accused of attempted rape added to the uncertainty.
The mood filtered through to equity and commodity markets, in turn denting appetite for higher-yielding currencies such as the Australian, Canadian and New Zealand dollars.
Strauss-Kahn had been due to meet German Chancellor Angela Merkel on Sunday and join euro zone finance ministers on Monday to discuss the bloc's debt crisis and how to handle Greece, which is struggling to meet the terms of a 110 billion euro European Union/IMF bailout granted last year.
Traders said the euro's fall met with strong demand from Asian sovereign accounts who were still keen to buy it on dips. This helped it to bounce back to $1.4110 in European trade, close to unchanged for the day.
"The peripheral euro zone problems continue to be somewhat of an albatross for the euro and they will keep the euro bulls at bay," said Paul Mackel, director of currency strategy at HSBC.
"These problems have been there all along but recently they've put more of a risk premium into the euro than was the case a few months ago."
Market players said the euro could stay under pressure as meaningful progress on resolving the Greek crisis was unlikely at Monday's meeting of finance ministers.
Greece is struggling to put its public finances in order under the joint three-year European Union and International Monetary Fund bailout programme.
"The key is whether the Greek parliament will approve its medium-term fiscal strategy. Should that happen, Germany and the IMF will likely come to an agreement to fill Greece's funding gap," said Raghav Subbarao, currency strategist at Barclays Capital.
The euro has fallen around 6 percent from a 17-month peak of $1.4940 hit less than two weeks ago as peripheral debt concerns resurfaced, but $1.40 appeared to be an important psychological level.
As well as reports of large bids in the euro on the approach to $1.4000, its 200-week moving average comes in at the same level. The 100-day moving average is at $1.3922 and the 50 percent retracement of the euro's Jan to May rally lies near $1.3900.
EURO LONGS
Data from a US financial watchdog showed speculators still had hefty long positions even after they trimmed their long positions in the euro -- and other higher-yielding currencies such as the Australian dollar -- in the week to Tuesday, which suggests chances of more liquidation of euro long positions.
As the euro wobbled, the greenback's index against a basket of six major currencies hit a six-week high of 75.950. It was last close to flat for the day at 75.723.
The euro was flat at 114 yen after slipping to a two-month low of 113.35, while the dollar was flat at 80.75 yen.
A 0.7 percent fall in world stocks dented risk appetite, knocking the Australian dollar down 0.3 percent to $1.0532, while the US dollar rose 0.5 percent against the Canadian dollar to C$0.9730.
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