FOREX-Euro near 3-mth low as political risks weigh

Tue May 8, 2012 9:25pm EDT

Related Topics

* Political uncertainty in Greece weighs on euro

* NZ dollar and Australian dollar hit 4-month lows

By Masayuki Kitano

SINGAPORE, May 9 (Reuters) - The euro eased and hovered near a recent three-month low on Wednesday, hurt by worries that political uncertainty in Greece and a French leadership change may undermine austerity plans key to tackling the euro zone's debt crisis.

The euro stayed under pressure after the leader of Greece's Left Coalition party said on Tuesday the country's commitment to an European Union/International Monetary Fund rescue deal had become null and void.

Greece's two main pro-bailout parties failed to win a majority in weekend elections, leaving questions over the country's ability to avert bankruptcy and stay in the euro.

The uncertainty weighed on currencies sensitive to shifts in investors' risk appetite, and helped drag the New Zealand dollar down to its lowest level in four months.

"One issue is whether this will cause investors to shun risk globally, or be viewed as the euro's problem alone and just lead to weakness in the euro," said Koji Fukaya, director of global foreign exchange research for Credit Suisse Securities in Tokyo.

While the euro might not fall very rapidly since market players probably already have placed bearish bets on the currency, the single currency may drop to around $1.29 or $1.28 over the next few weeks, Fukaya said.

The euro eased 0.2 percent to $1.2978, not very far from a three-month low near $1.2955 hit on Monday on trading platform EBS.

The single currency has retreated this week, following elections in Greece and France.

Socialist French President-elect Francois Hollande has advocated an approach to tackling the debt crisis centered more on growth, which may create tensions with Germany's insistence on fiscal austerity.

The New Zealand dollar slid 0.4 percent to $0.7846. It fell to $0.7845 at one point, the kiwi's lowest level since early January.

The Australian dollar also slipped to a four-month low, falling to $1.0066 at one point.

The safe haven yen was steady to firmer. The dollar held steady at 79.89 yen. A trader for a major Japanese bank in Singapore said there was some dollar selling interest in the 80.05 to 80.10 yen area.

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