Euro sinks in Asia

The euro sank to an eight-month low on Monday on selling by macro funds and is poised to fall further after the Greek government said the debt-ridden country will miss a deficit target set just months ago in a massive bailout package.
Stocks, commodities and growth-linked Asian currencies ground lower, prompting both leveraged and macro funds to unwind their long positions in the risk-sensitive Australian dollar, sending it to a 10-month low at $0.9592.
With Europe bitterly divided over the best cure for the spiralling debt crisis and with the possibility of a Greek default looming larger than ever, the euro was likely to keep falling in the coming days, players said. The euro dived 0.5 percent to $1.3320 from $1.3418 in New York on Friday. The single currency lost 7 percent in September - the largest monthly drop since November 2010.
If Greece defaults on its debt, Ino said he thought the euro could initially fall to $1.32 and would then quickly move towards $1.30. For now, technical support for the single European currency lies at January lows around $1.3250-80 and then in the $1.3250-00 zone, formed by trend channels, internal wave targets and Fibonacci projection objectives.
The options market points to a strong appetite for long-term euro/dollar puts. One-year risk reversal spreads continued to widen and hit a record high around 4.0 at the end of last week and still stand near that level. ECB member Christian Noyer also said it was unrealistic to expect an increase in Europe's bailout fund beyond what was agreed in July, but he was open to schemes that would allow leveraging to expand capacity.
The dollar index hit an eight month high, gaining 0.7 percent to 79.092. The greenback also was steady on the yen, after hitting a two-week high at 77.27 yen and breaking above its 55-day moving average at 77.17 for the first time since its spike after intervention on August 4. Stop losses loom around 77.30 yen, while orders are seen around 77.50, yen traders said.
Although the dollar failed to maintain early gains above 77.17 yen, a close above that mark could improve sentiment towards the pair, especially as seasonal selling before end-September book-closings by Japanese exporters has run its course. Tokyo dealers also reported macro funds building dollar-long positions and analysts said that if the current crisis deepened, this time the yen could weaken versus the dollar, unlike the global financial crisis in 2008.