The euro fell on Monday, hitting a record low against the Swiss franc and dropping against the yen as investors grabbed perceived safe-haven currencies on concerns that the eurozone debt crisis could worsen in the near term.
The dollar also hit a record low against the Swiss franc as wrangling in the US Congress over the country's debt ceiling dragged on. Italian and Spanish 10-year bond yields rose sharply while the cost of insuring peripheral eurozone debt against default soared to record highs as contagion risks and concerns over policymakers' failure to quickly resolve the region's debt crisis dragged the euro lower.
European bank stress test results released on Friday did little to calm jitters, and attention is shifting to Thursday's emergency meeting of EU leaders, when a second bailout package for Greece will be under discussion.
German Chancellor Angela Merkel called on Sunday for private investors to make a major contribution to bailing out Greece. Officials proposed a range of schemes for the European Financial Stability Facility to finance a buy-back or a swap in which private owners of Greek government bonds would accept cuts in the face value of their holdings. The euro fell sharply against the Swiss franc early in the Asian trading day to change hands at a record low of 1.1365, according to dealers, down from 1.1501 late in New York on Friday.
The pair bounced to 1.1475 francs in European dealing, helped by German bank buying, but was still down 0.5 percent for the day. Traders said the franc's rise in Asian trade may have been exacerbated by thin conditions owing to a Japanese holiday.
The franc continues to be the G10 currency of choice for investors and traders seeking liquidity and relative safety from concerns that the eurozone's sovereign debt crisis could spread to countries such as Spain and Italy.
Euro/Swiss one-month implied volatilities climbed with the near term rising at a faster pace and the curve getting more inverted. One-month euro/Swiss rose to 13.9 percent from 13.2 percent on Friday, while one-week implied vols advanced to 15 percent.
Euro/Swiss one-month risk reversals also reflected a downside bias for the euro. The euro was down 0.8 percent versus the dollar on the day at $1.4040, off an earlier low of $1.40145. Technical analysts said next support was the 200-day moving average around $1.3912. The euro fell over one percent against the low-yielding yen to 110.66 yen and last traded around 111.03 yen. The dollar also fell to a record low of 0.8034 francs on EBS. It rebounded to 0.8171 as some dealers covered their short positions, but with the US grappling with its own troubles with debt, any bounce in the greenback is likely to prove fleeting, traders said.