Euro falls in London

The euro backed off a two-month high against the dollar on Monday after an early burst of buying ran out of steam, while political turmoil in Ireland highlighted uncertainties facing heavily indebted eurozone countries.
Tough talk on inflation pressures from European Central Bank chief Jean-Claude Trichet on Sunday helped to push the euro to $1.3648 in early Asian trade, its strongest since late November.
But a lack of follow-through demand and worries over political instability in some eurozone countries knocked it back down.
Investors also focused on Ireland after Prime Minister Brian Cowan resigned as head of the Fianna Fail party at the weekend, plunging the country into political turmoil as it tries to pass a budget bill to access an EU and IMF bailout.
Analysts said political instability in Ireland raised concerns about whether the government would be able to approve the budget bill, and when an election would be called.
The euro was down 0.5 percent on the day at $1.3550, roughly a cent below its early Asian high. Traders cited selling demand from a German name and a semi-official European name hitting the currency.
The fact that the Socialist party rules without a majority in Portugal has added to investor concerns over a debt crisis in the past year and helped push Portuguese bond yields sharply higher.
The euro has rallied some 6 percent in the past two weeks, aided by increasing international support for the eurozone's debt rescue plan and concerns that higher inflation will prompt a eurozone rate rise in the next few months.
The latter has widened the spread between eurozone and US bond yields and boosted the euro, but some analysts argue that weakness in countries including Ireland, Greece and Portugal may hold the ECB back from raising rates in the near term.
"The euro's rise today was driven by stop-losses, and once those were taken out there were no more bids in the market," said Anders Soderberg, currency strategist at SEB in Stockholm.
Solid data on eurozone industrial orders and a robust eurozone flash estimate of services PMI failed to lift the currency.
It hovered within reach of a key technical level around $1.3570, a 50 percent retracement of its decline from November to early this month. Technical analysts say it must hold above that level on a sustained basis to extend its gains.
The euro was flat at 112.35 yen, off a two-month high of 112.70 hit in earlier trade. Still, it hovered around its 200-day moving average around 112.23 yen after breaking above for the first time in 12 months.
The euro's broad rally has cleared out short positions, bets that the shared currency would depreciate. The latest CFTC data show IMM euro positions held by speculators shifted to 4,109 net long contracts last week, versus 45,182 net shorts the previous week.
The euro's pullback on Monday helped to support the dollar, which rose 0.3 percent to 82.89 yen, while the US currency rose 0.3 percent versus a currency basket.