Sterling fell to a 7-1/2 month low versus the dollar on Monday as worries about contagion from the eurozone debt crisis boosted demand for the greenback. Traders cited selling by a European investment bank that triggered stop losses orders and briefly pushed the pound to a trough of $1.5774, its lowest level since January. It pared some of those losses to last trade at $1.5820, down 0.4 percent on the day, and could ease further in coming days.
"We expect cable to trade lower as the sovereign debt crisis in Europe continues to escalate," said Lee Hardman, currency strategist at Bank of Tokyo-Mitsubishi. Sterling slipped from a six-month high versus the euro as market players pared back some bearish bets against the single currency. But the pound looked likely to remain supported by persistent concerns about Greece's ability to repay its debts.
The euro was last up 0.4 percent at 86.25 pence, off a session low of 85.31, its lowest level since early March. Traders said the move higher tracked a rise in the euro versus the dollar as market players squared some short positions, and a UK real money account bought just below 86.10 pence.
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