Euro hits 10-year low versus yen in London

The euro fell to a seven-month low against the US dollar and a 10-year trough versus the yen on Monday, hurt by fears of a Greek default and the risk of contagion engulfing the region's banking system and larger economies. The yen was a big beneficiary of safe-haven inflows, keeping alive the risk of intervention by Japanese authorities.
Italian and Spanish yields rose, widening their spreads over German Bunds, while European stocks and banking shares fell, highlighting how brittle investor confidence was in eurozone assets. The common currency fell as low as $1.34949, its lowest since February before recovering to $1.3633, still down 0.2 percent on the day on top of a 1.6 percent fall on Friday. It came off lows on bargain hunting from European funds and sovereign investors, but analysts expected further falls. "Bargain hunting has lifted the euro a bit higher in the European session but clearly it is vulnerable to downside risks in the coming days and weeks," said Jane Foley, senior currency strategist at Rabobank. "Investors will look to fade (sell) into rallies."
Against the yen, the euro fell 1.7 percent to 103.90 yen, its lowest in 10 years, having broken below big option triggers at 105 yen and 104.50 yen. It was last at 104.91 yen, down 1 percent on the day. The dollar was last down 0.75 percent at 76.99 yen, not far from its record low of around 75.94 yen struck in mid-August. The Australian dollar, seen as a barometer of market players' risk appetite, fell more than 1.5 percent to a 1-month low of $1.0276 as investors fretted that the global economy could be dealt a blow if eurozone debt woes deepen.
As market players bet on a further fall in the euro against the yen, risk reversal spreads for euro/yen rose to their widest in over a year in favour of euro puts, or bets on the euro falling. One-month and three-month euro/dollar risk reversals also showed a fresh record high bias for euro puts. The euro's broad losses helped the dollar index rise to its highest level in over six months. It was last up 0.1 percent at 77.237 with strong resistance at the 38.2 percent retracement of the index's fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.