The euro dived to a seven-month low against the US dollar and a 10-year trough versus the yen, falling below key technical levels and option barriers on worries that the eurozone's support for Greece is wobbling and that the country may be forced to default on its debt.
The Australian dollar, sometimes seen as a barometer of market players' risk appetite, tumbled 1.5 percent in Asia to a three-week low, below its 200-day moving average, as investors fret that the global economy will be dealt a severe blow if the eurozone's debt woes deepen.
"The outlook for Greece is almost completely unknown. Support for the country appears to be shaking. The market is starting to think the worst could happen," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Banking. Fears about a Greek default rose after senior politicians in German Chancellor Angela Merkel's centre-right coalition started talking openly about it.
The common currency fell as low as $1.34949, its lowest since February. It last traded at $1.3520, down 1 percent on the day on top of a 1.6 percent fall on Friday. The currency has clearly dropped below $1.3655, a 61.2 percent retracement of its rally to $1.4940 in May from $1.2860 in January. Against the yen, it fell 1.6 percent to 104.10 yen, its lowest in 10 years, having broken below big option triggers at 105 yen and 104.50 yen.
The euro could fall to around 99.20 yen, its fair value based on purchasing power parity, said Makoto Noji, senior strategist at SMBC Nikko Securities, noting that there are few technical support levels after 108.08, a 76.4 percent retracement of its rally from 2000 to 2008, is broken. In the very near-term, the euro could be oversold, trading way below the lower Bollinger Band, now at $1.3711. Its 14-day relative strength index has fallen below the 30 mark, which is considered to be oversold territory, for the first time in more than nine months.
The dollar index rose as far as 77.784, its highest in almost seven months. Against the yen, however, the dollar slipped 0.6 percent to 77.12, falling from a one-month high around 77.88 set on Friday, dragged down by selling in euro/yen. Commodity currencies were under pressure on Monday with the Australian dollar falling 1.6 percent to a three-week low around $1.0340, having dropped below its 200-day moving average of $1.0383.
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