The euro traded near a seven-week low against the dollar on Monday on doubts that a European finance ministers' meeting would offer more clarity on eurozone debt aid, but losses were limited with demand for the single currency seen around the psychologically key $1.40 level.
The euro initially fell to $1.4048 on electronic trading platform EBS after the arrest on sexual assault charges of IMF chief Dominique Strauss-Kahn prompted speculation that changes at the top of the multilateral lender may affect discussions on aid for indebted eurozone states.
That view added to broad risk aversion, prompting short-covering demand for the dollar at the expense of higher-yielding currencies including the Australian, Canadian and New Zealand dollars. Equity and commodity markets also took a hit, which analysts said was helping to support the dollar. The IMF moved to fill a leadership vacuum by naming No 2 official John Lipsky as acting managing director.
Strauss-Kahn had been due to join eurozone 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. 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 appears to be an important support level.
It represents its 200-week moving average, while the 100-day moving average lies at $1.3922. Below that is the 50 percent retracement of the euro's January to May rally, near $1.3900. As the euro wobbled, the greenback's index against a basket of six major currencies hit a six-week high of 76.001. It was last close to flat for the day at 75.809.
The euro was flat at 114.02 yen, near a two-month low of 113.40 according to EBS, 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 0.4 percent to $1.0532, while the US dollar rose 0.9 percent against the Canadian dollar to C$0.9770.
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