* Greek election raises doubts about bailout scheme
* Euro hits 3-mth low vs dollar, 3-1/2 yr low vs pound
* Euro/dollar has support at $1.2950
* Hollande victory seen raising uncertainty on Paris-Berlin
* Aussie falls, yen gains on broad risk averse sentiment
By Hideyuki Sano
TOKYO, May 7 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.
In particular, the apparent failure of two pro-bailout
ruling parties in Greece to win a majority in the parliament is
throwing the future of the bailout scheme for the country into
With 95 percent of votes counted, the conservative New
Democracy (ND) and socialist PASOK, which have dominated Greece
for decades, are seen falling short of the 151-seat threshold
needed for even the most fragile majority in parliament.
"The PASOK did unexpectedly poorly in the election ... Until
we have more clarity on how the coalition government will be
formed and what the new government will do with the bailout
scheme, the euro will stay under pressure," said Masafumi
Yamamoto, chief FX strategist at Barclays.
The euro fell as far as $1.29552, its lowest since
Jan. 25, breaking below the rough $1.30-$1.35 trading band it
had been stuck in since February. The euro last traded at
$1.2978, down 0.8 percent from late U.S. levels last Friday.
For now, the euro has support at $1.2950, a major option
barrier and the 61.3 percent retracement of its rally from its
January low to a high in February, although uncertainty on
Greece could overwhelm this.
"Things look really fragile. We'll have to see whether the
ND can form a government," said a trader at a Japanese bank.
Another source of uncertainty, albeit a small one compared
to developments in Athens, comes from France, where Socialist
Francois Hollande swept to victory, ousting centre-right
incumbent Nicolas Sarkozy.
While that outcome had been widely expected, some market
players worry that Hollande's focus on growth measures to temper
austerity could put Paris on course to clash with Germany's
insistence on tough deficit reductions.
German Chancellor Angela Merkel's conservatives were in
danger of being ousted from power in the German state of
Schleswig-Holstein after her party suffered its worst showing
since 1950 in a local election on Sunday, boding ill for another
local election next Sunday in North Rhine-Westphalia, Germany's
most populous state.
"Will Hollande and Merkel be able to push through needed
eurozone wide agreements in the way Merkel and Sarkozy were?,"
asked Jens Norvig, strategist at Nomura, in notes to clients.
The euro also fell to 103.24 yen, its lowest
level since mid-February and to 80.37 pence, a
trough last seen in November 2008.
Disappointing jobs data from the U.S. on Friday added to the
euro zone jitters, leading traders to cut exposure to risky
assets, including the Australian dollar.
The Aussie fell to as low as $1.0110, its low so far this
year, though upbeat Australian retail sales data helped it
recover slightly from lows. It last stood at $1.0130,
down 0.5 percent.
The yen, traditionally a safe-haven currency due in part to
Japan's net foreign assets, gained against the dollar, which
slipped 0.15 percent to 79.78 yen.
The U.S. dollar fell back below the 80 yen mark, seen as a
support, on Friday after data showed US employers added 115,000
workers to payrolls last month, a third straight month of
slowdown in hiring.
Still, the dollar was supported above two-month low of 79.64
yen hit last week, with another support seen at 79.14 yen, a
61.8 percent retracement of its rally from February to March.
Many market players say these support levels are likely to
hold for the time being.
"The momentum of U.S. growth is slowing. Still, the economy
looks in much better shape than last year," said Minori Uchida,
senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ
"Foreign players are also wary of the risk of more credit
downgrades on Japan... There are no strong reasons to be long in
the yen," he added.
A senior official of Standard & Poor's said last week that
Japan is in danger of slipping from its AA- credit rating if
reforms are held up as its unpopular government struggles to get
support for tax measures.
Japan's trade surplus -- a source of the yen's strength for
decades -- is vanishing as the country imports more fossil fuels
after the Fukushima disaster last year.
The country shut its last active nuclear reactor on
Saturday, leaving it with no nuclear-derived electricity for the
first time since 1970.