Euro strikes nine-month dollar low

The euro slumped to its lowest level in more than nine months against the dollar today as the shared eurozone currency was plagued by concerns about the Greek debt crisis, traders said.

Elsewhere, the British pound pulled back from 10-month lows against the dollar reached yesterday.

In London morning deals, the European single currency tumbled to 1.3436 dollars, reaching a level last seen on May 18, 2009. It later recovered slightly to 1.3495 dollars, down from 1.3556 in New York late on Monday.

"The spike lower this morning indicates market nervousness about the prospects of a Greek bailout -- the message coming out of Europe is still confused," said CMC Markets analyst Michael Hewson.

"Talk of a bailout does not equate with German Chancellor Merkel's comments at the weekend that Greece has to resolve its own problems.

"Some market commentators have argued that the Greece problem is done and dusted -- they are wrong."

A warning by the European Union's financial official Olli Rehn that Greece must act fast and step up measures to slash its public deficit ahead of a key deadline in two weeks soured investor sentiment towards the euro, dealers said.

Greece's deficit is more than four times the allowed EU limit, at an estimated 12.7 percent of gross domestic product.

Hewson added: "The Greece problem is symptomatic of a wider Europe wide sovereign debt problem and if by some miracle Greece is able to implement an austerity budget we still have the problems of Portugal, Spain and Italy.

"The key level ... remains 1.3485, however the likelihood of a break increases with every day as euro rallies become ever more fragile and 1.3200 is only a matter of when and not if."

Athens has pledged to cut the deficit by four percentage points this year but there are widespread concerns that it will fail to meet that target.

Eurozone nations must coordinate economic policies more closely, German Chancellor Angela Merkel had said on Monday, acknowledging that the euro was in a challenging phase.

"We agreed that we must have stronger coordination of our economic policies," Merkel said after talks with Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country currently heads the European Union.

She added that sticking to the EU's fiscal rules was "of great importance at the moment."

Under the EU's Stability and Growth Pact, countries are supposed to keep their budget deficits under three percent of Gross Domestic Product (GDP) and total, accumulated debt under 60 percent.

Elsewhere, sterling recovered one day after striking a 10-month low point against the dollar on fears that Britain's upcoming general election could lead to a hung parliament with no single party commanding a majority.

In London on Tuesday, the euro was changing hands at 1.3495 dollars against 1.3556 dollars on Monday, at 120.10 yen (120.78), 0.9023 pounds (0.9044) and 1.4635 Swiss francs (1.4633).

The dollar stood at 88.99 yen (89.08) and 1.0844 Swiss francs (1.0792).

The pound was at 1.4955 dollars (1.4987).