The euro dropped on Tuesday to its lowest level against the US dollar in two-and-a-half weeks as global economic growth concerns and fears about Greece's bailout led investors to shun risk. Worries about slowing growth also weighed on commodity currencies, with the Australian and New Zealand dollars dropping to their lowest levels in over a month after China, the world's second-largest economy, announced its lowest annual growth target in eight years.
"All the nervousness heading into the Greek PSI (private sector initiative) deal is weighing on all markets. Euro, commodities, stocks, emerging markets, you name it, except the yen," said Win Thin, currency strategist at Brown Brothers Harriman in New York. The euro traded down 0.79 percent at $1.3114, up from its session low of $1.3101, its weakest since February 16, after triggering sell orders on the break of Monday's $1.3160 low.
Technical support was expected from the 55-day moving average around $1.3071. The low-yielding yen, however, outperformed against the dollar, which retreated after failing to break above a nine-month high of 81.86 yen. The dollar dropped 0.84 percent to 80.76 yen in late New York trade on Tuesday.
The euro has mostly been on a downward trajectory against the dollar ever since the European Central Bank completed its Longer Term Refinancing Operation last Wednesday. "With the ECB's LTRO in the rearview mirror, the market has shifted focus to the outlook for economic growth in China and the US in addition the uncertainty surrounding the Greece debt exchange offer," said Andrew Cox, G10 strategist at CitiFX, a division of Citigroup, in New York. China cut its growth forecast to 7.5 percent from 8 percent, well below the 10.7 percent average pace recorded over the past decade.
While the LTRO assuaged bank funding concerns, the offer of cheap loans was deemed by some as tantamount to quantitative easing. Concerns about a faltering eurozone economy also pushed the euro down 1.73 percent against the yen at 105.88. Revised GDP data confirmed the eurozone economy looked set for recession after contracting in the fourth quarter of 2011. This followed purchasing manager surveys on Monday which highlighted a weak outlook for the region.
Greece and its creditors are in the final stages of talks aimed at a deal to cancel more than 100 billion euros of its private sector debts - a key part of a 130 billion euros bailout, the second rescue Athens has required. The Australian dollar hit a global session low against the US dollar at $1.0550, its lowest level since January 30. It traded at $1.0539, down 1.19 percent on the day. The New Zealand dollar hit a low of $0.8096, its lowest since January 25. It last traded at $0.8118, down 1.10 percent on the day.