The euro slipped on Monday, hovering within sight of an eight-month low against the dollar and a decade low versus the yen, as mounting concerns of a Greek default deepened investor worries about the health of the eurozone's banking sector. With Europe still deeply divided over how to tackle the spiralling debt crisis and the risks that poses for the bigger eurozone economies and the financial sector, the euro is likely to stay under pressure, market players said.
The euro was down 0.2 percent at $1.3357, having fallen to a low of $1.3313 - its lowest since mid-January. The shared currency lost 7 percent in September - its largest monthly drop since November 2010. Traders cited talk of option barriers at $1.3300, $1.3275 and $1.3250.
Against the safe-haven yen, the euro was down 0.4 percent at 102.73 yen, not far from its decade low of 101.95 struck on trading platform EBS late last month. Concerns about cooling global growth prompted both leveraged and macro funds to unwind positions funded in the dollar and the yen. As a result, the risk-sensitive Australian dollar hit a 10-month low at $0.9592.
Investors are also awaiting an European Central Bank rate decision on Thursday. Some market players are expecting it to cut rates by 25 basis points and announce fresh liquidity measures to support the banking sector. Speculators have been adding to their bearish bets against the euro and this trend is likely to continue. The options market points to a strong appetite for long-term euro/dollar puts - bets that the euro will weaken. One-year risk reversal spreads hit a record high around 4.0 at the end of last week and remain near that level.
The euro's losses saw the dollar index rise to an eight month high of 79.154. It was last up 0.4 percent at 78.857. Currency speculators increased bets on the US dollar to their highest since June 2010.
The greenback eased against the yen to 76.85 yen, having hit 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, traders said.