Euro plunges broadly

The euro plunged broadly on Monday and could continue to falter as fears mounted that Europe's debt crisis may spread to Italy, the eurozone's third largest economy. European Union finance officials struggled to find ways to resolve Greece's debt crisis, galvanised by the growing threat of contagion to Italy.
The euro hit a four-month low against the yen and a six-week trough against the dollar. The Financial Times reported that some European leaders would consider letting Athens default on some of its bonds, adding to market anxiety. "A default by Greece would be enough to set off a widespread sell-off in the financial market, but a default by Italy would be worse than Lehman," said Kathy Lien, director of currency research at GFT Forex in New York, noting the much greater level of exposure by big banks to Italian debt.
The euro slid to $1.3984, its lowest level against the dollar in six weeks. It last traded down 1.8 percent at $1.4012. It is estimated that the top 91 banks have more than 100 billion euros worth of exposure to Italy, far more than Greece's debt, while banks hold more Italian debt than Spanish debt, Lien said. The spread between yields on 10-year Italian and German government debt widened further on Monday.
The euro fell to its lowest level against the yen since March 18, dropping as low as 112.32 yen. The euro was last down 2.2 percent at 112.48 yen. The euro also hit a record low against the Swiss franc at 1.1672 francs. Against a basket of major currencies, the dollar was up 1.2 percent at 76.042. Against the yen, the dollar fell 0.5 percent at 80.24.