Euro hits four-year low in London

The euro hit a four-year low against the dollar on Wednesday after Germany banned naked short selling of some securities, sparking uncertainty and a fresh wave of risk aversion which lifted the dollar and yen. Germany banned on Tuesday naked short selling of eurozone government bonds, some stocks and naked selling of credit protection backed by sovereign debt.
The ban triggered anxiety about whether more regulation could follow and other countries would follow suit. Comments by German Chancellor Angela Merkel that the euro was "in danger" further undermined confidence in the single currency. "The German announcement came out of the blue, without warning, and there is major uncertainty about what this means, whether others will follow and how they will maintain this," said Stuart Bennett, currency strategist at Credit Agricole.
At 1130 GMT, the euro had edged back to trade up 0.2 percent at $1.2205, not far from a low of $1.2143 hit in early Asian trade on trading platform EBS. That move stopped ahead of key technical support at $1.2135, the 50 percent retracement of the entire bull move in the euro from all time lows near $0.82 to the record highs just above $1.60.
Traders said option barriers at $1.22 were taken out and more were lined up at $1.21, $1.20 and right down to $1.15. Against the yen it fell 1 percent to a two-week low of 110.88 yen before steadying back at 111.45. Perceived higher risk currencies came under heavy selling pressure, with the Australian and New Zealand dollars falling to 8-month troughs versus the US dollar and losing more than 3 percent versus the yen.
Investors sought the perceived safety of the dollar and the low-yielding yen. The dollar hit a 14-month high of 87.458 against a basket of currencies, though it fell around 1 percent versus the yen. The euro has fallen about 15 percent against the dollar so far this year, hammered by concerns Europe's debt problems and austerity measures to combat them could hamper the eurozone's economic recovery. The euro also fell to a record low against the Swiss franc below 1.4000 francs before steadying just above that level, which traders said was seen as the Swiss National Bank's new intervention threshold.