The euro fell on Monday, hitting a 1-month low against a broadly firmer yen as investors shunned riskier assets, while it was also pressured on expectations that eurozone interest rates will be cut further later in the week. European shares retreated nearly 1 percent on the day, following a rout in Asian shares after Friday's US payroll data showed the world's largest economy lost more than one million jobs in the final two months of the year.
Investors sought the low-yielding yen as they shunned riskier assets, boosting the Japanese currency to a 3-week high against the dollar as well. "Risk appetite is nowhere to be seen," said Christian Lawrence, currency strategist at RBC Capital Markets. By 1159 GMT, the euro fell 0.7 percent against the yen to 120.40 yen, having earlier hit a low of around 120.09 yen, while it lost 0.2 percent against the dollar to $1.3415.
The higher-yielding Australian dollar lost 2.5 percent versus the US dollar to hit a low of $0.6833 and fell 2.2 percent against the yen at 61.58 yen, weighed down by risk aversion and lower commodity prices. The US dollar also tumbled to a 3-week low against the yen at 89.62 yen.
Sterling was sharply lower as it has also been viewed as a high-risk currency, dropping by 1.3 percent against the dollar to below the $1.50 mark. The pound also fell 1.5 percent against the yen at 134.34 yen "I still see the yen attracting a lot of safe haven money and equities look like we may take another look at the lows soon," IdeaGlobal strategist Maurice Pomery said in a note.
Data last week showed factory output collapsing across Europe, raising the prospect for a sharp economic downturn and increasing expectations for a large rate cut when the European Central Bank meets to decide policy on Thursday. Such sentiment was echoed by IMF Managing Director Dominique Strauss-Kahn, who said in a media interview on Monday that Europe was "behind the curve" on taking economic stimulus measures and he expected interest rates to decrease further in Europe.
Markets expect the ECB to cut key interest rates by 50 basis points to 2.0 percent, according to a recent Reuters poll. Interest rate futures on Monday showed they expected a 75 basis point cut, and some chancing a full one percentage point move. "Going into the meeting, the euro will be under pressure as the market expects the ECB will cut ... with economic data arguing in favour of aggressive easing," said BTM-UFJ currency economist Lee Hardman.