The euro hit a record low against the Swiss franc on Monday due to concerns Europe's debt crisis is spreading to its core economies, and the single currency looked vulnerable to more losses. Top EU finance officials gathered for an emergency meeting in Brussels on Monday to discuss Greece's intractable debt crisis, galvanised by the growing threat of contagion to Italy.
A Financial Times report saying some EU leaders were considering allowing a selective default by Athens to put its debt on a more sustainable footing, also dented the single currency, traders said. Against the Swiss franc the euro hit a record low of 1.1790 francs, down 1.2 percent on the day. Euro selling gathered pace after breaking through a large options barrier at 1.1800 francs as investors preferred safe-haven currencies on the back of rising concerns about contagion from eurozone debt.
The single currency slid 1.3 percent to a near one-month low of $1.4088, as traders said stop-losses were triggered on the break of a large option barrier at $1.4130. Downside support is now seen around its 200-day moving average at $1.3923. The euro also slipped 1.4 percent on the day versus the Japanese yen to 113.36 yen.
"The euro will be under pressure for the entire week, there's plenty of event risk especially bank stress tests on Friday," said Tom Levinson, FX strategist at ING. "This is a pretty challenging environment. We could see a test of $1.4000 unless something comes from the eurozone politicians to reassure the markets on Greece and Italy, and that is unlikely."
Italian bond yield spreads over safe-haven German Bunds hit fresh euro lifetime highs on Monday and credit default swaps also soared to record levels, extending moves from Friday when new worries about contagion from Greece hit the market. Market players said Swiss franc strength was likely to hold in such a jittery market.
Against the dollar, too, it is headed lower with technical signals suggesting it is set for more losses as it fell below trendline support from its May lows at $1.4156. "This trendline support is regarded as the break down point to the 200-week moving average at $1.4024, the 1.3968 recent low and the 200-day moving average at $1.3907," said technical analysts at Commerzbank in a note.
The dollar index rose around 0.8 percent to a two-week high of 75.807, up from Friday's low at 74.843. It faces resistance at its mid-June peak of 76.015. The dollar stood at 80.60 yen, up 0.2 percent from late US trade on Friday, supported by bids from Japanese importers, but below Friday's five-week high around 81.50 yen. Global growth worries pulled commodity currencies lower as the Australian dollar fell 0.6 percent to $1.0688. The New Zealand dollar slipped 0.4 percent to $0.8339, pulling back from Friday's record high near $0.8400.