TOKYO (Reuters) - The euro slipped to a four-month low against the dollar on Tuesday as a political stalemate in Greece stoked fear the country may renege on bailout pledges made to international creditors and exit the currency bloc.
Concerns about slowing Chinese and global growth also drove down higher-yielding currencies and boosted the safe-haven dollar and yen, with the Australian dollar flirting with a five-month low against the U.S. currency.
Greek Party leaders are expected to convene at 2 p.m. (1100 GMT) but there is little hope President Karolos Papoulias's proposal to form a technocrat government would end the stalemate, making a new election the most likely outcome.
Many market players think a fresh election will make it more likely for Athens to ditch its bailout pledges and hence the euro, even though euro zone finance ministers dismissed talk of Greece's exit as "propaganda and nonsense".
"Another election is likely to make fiscal rebuilding less likely," Daisuke Karakama, market economist at Mizuho Corporate Bank, said.
The euro gained a foothold around support at $1.2827, the 76.4 percent retracement of its rally earlier this year from $1.2624 to $1.3486.
The common currency last stood at $1.2827 after having fallen as low as $1.2814, its lowest in nearly four months.
A clear break of that retracement level could open the way for a test of the January low of $1.2624, though some analysts said the euro could enjoy some rebound in the short term, having fallen more than three percent so far this month.
"The euro is probably oversold in the very near-term below $1.28," said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ. "Oscillator charts are screaming it's time for a rebound," he added.
The euro's fall saw the dollar index .DXY rising to a four-month high of 80.739 as the index climbs above its peak in March.
While the dollar has benefited from the euro zone's woes, its gains have been curbed by speculation that the U.S. Federal Reserve is willing to take additional easing steps should the U.S. economy deteriorate.
Even though not many market participants expect the Fed to announce fresh easing steps next month, U.S. retail sales and consumer inflation numbers due later in the day are in focus because they could change that expectation.
Against the yen, the dollar moved little at 79.91 yen, above a 2-1/2-month low of 79.428 yen hit last week, with major support seen at 79.14, a 61.8 percent retracement of its rally from February to March.
The Australian dollar briefly fell to a five-month low of $0.9945, after the Reserve Bank of Australia's minutes of its May policy meeting showed concerns about a cooling in growth and inflation were behind its unexpected 50 basis point rate cut earlier this month.
Apart from political turmoil in Europe, the Aussie has been pressured by concerns over slowing growth in China and other emerging economies, which have been the main driver of global growth.
The currency, however, has managed to float above a major support at $0.9945-50, the 61.8 pct retracement of its climb from October to February. It last stood at $0.9983.
Additional contribution from by Reuters FX analyst Krishna Kumar in Sydney; Editing by Sanjeev Miglani