LONDON: The euro fell towards 9-month lows against the dollar on Tuesday, hurt by a plunge in German analyst and investor morale in August which added to signs of a slowdown in the euro zone recovery.
The German ZEW survey showed both the current situation index and the expectations index deteriorated sharply, as Europe's largest economy was hit by uncertainty caused by the Ukraine crisis.
Economic sentiment fell for an eighth consecutive month to 8.6 in August, its lowest since December 2012. The reading was well below forecasts.
The West has imposed tough sanctions on Moscow, one of Germany's biggest trading partners, over Russia's purported role in Ukraine. Russia, has responded with sanctions which analysts say will hurt the euro zone.
"The sentiment survey is consistent with some of the loss in momentum we have seen for the German economy and does not bode well for the euro zone," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
"If the euro drops past the $1.3330-35 support area, then bears could target $1.3295 in the coming days."
The euro fell to $1.3339 after the survey was released, down 0.3 percent on the day, and not far from a nine-month low of $1.3333 struck on Aug. 6. It was also lower against the yen at 136.50 yen, eyeing a recent trough of 135.73 yen.
The euro's losses saw the dollar edge up. The index rose 0.2 percent to 81.648 with the dollar making gains against the yen and the Swiss franc.
The safe-haven yen stayed off highs notched up late last week when concerns about the situation in the Middle East and the conflict between Ukraine and Russia were more acute. The dollar bought 102.30 yen, adding about 0.15 percent and pulling away from Friday's two-week low of 101.51 yen.
Apart from the euro, a big mover was the New Zealand dollar which fell to a two-month low against its U.S. counterpart.
It dropped to $0.8407, and its lowest since June 4 when it fell to $0.8401. It was last trading at $0.8425, down 0.4 percent on the day.
That was a long way off a near three-year high of $0.8839 hit last month, with the currency dogged by expectations of a slowdown in the pace of New Zealand interest rate rises and an ongoing tumble in global dairy prices.
Fresh evidence that the housing market there was cooling was also adding to selling pressure, traders said.
"The New Zealand dollar is now reaching the key $0.84 level. A break below this level would confirm a technically bearish "double-top" formation suggesting a move below $0.80," Morgan Stanley said in a note.
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