Euro drops on anti-austerity votes but off lows

Mon May 7, 2012 12:56pm EDT
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By Julie Haviv

NEW YORK (Reuters) - The euro dropped broadly on Monday after elections in Greece and France cast doubt on politicians' commitment to austerity plans aimed at tackling the euro zone debt crisis.

Renewed fears about the stability of the euro zone made the common currency pierce the key psychological level of $1.30 on its way to hitting a three-month low against the dollar in the overnight session.

Technical support helped pare losses during New York trade, though the single currency looked likely to remain under pressure in days ahead.

The biggest blow to the common currency was the Greek election, in which the two main parties that support the nation's international bailout failed to secure a parliamentary majority. This threw into question the future of the program and potentially the country's membership in the euro.

The euro hit a global session low of $1.2955, breaking the $1.30 to $1.35 range it has been trapped in since late January, before recouping losses to last trade down 0.3 percent at $1.3048.

"Technically, the daily momentum remains bearish after the euro collapsed in the overnight (session)," said Dean Popplewell, chief currency strategist at OANDA in Toronto. "So far this morning, cooler heads have retraced some of that loss."

"Currently, the risk reward is not to hold long euro positions in such a negative tone environment," said Popplewell, noting markets were illiquid with the UK on holiday.

In France, Socialist Francois Hollande, who has pledged to balance the budget but more slowly than his opponent, ousted centre-right incumbent Nicolas Sarkozy. The result could trigger a push-back against German-led austerity across the euro zone.   Continued...

An employee of foreign exchange trading company is pictured past trading monitors in Tokyo May 7, 2012. The euro tanked on Monday, breaking below its well-worn range from the past three months against the dollar after elections in Greece and France raised fresh concerns that the euro zone's hard-earned bailout and austerity steps could fall apart. REUTERS/Yuriko Nakao