(Adds quote, details about euro zone PMIs)
* Speculators add to huge bets against euro
* EU threatens Russia with new trade sanctions
* SNB head says bank ready to intervene to defend cap
By Anirban Nag
LONDON, Sept 1 The euro hit a year-low against
the dollar on Monday, as investors added to bets against the
single currency before a policy meeting this week and as worries
about the crisis in Ukraine kept alive risks to the euro zone's
The euro fell as far as $1.3119 in Asia, reaching
lows not seen since early September 2013. It last traded at
$1.3128, flat on the day. It hit a five-week low against the
British pound of 78.96 pence, down 0.2 percent on
the day and was trading not far from recent three-week lows
against the yen.
Ukrainian President Petro Poroshenko warned a "full-scale
war" was imminent if Russian troops continued an advance in
support of pro-Moscow rebels as Europe and the United States
threatened Russia with new sanctions.
Analysts said the risk to euro zone growth posed by the
Ukraine conflict and stubbornly low inflation should keep the
pressure on the European Central Bank to provide further
stimulus at some stage, if not this week.
"There are a many reasons to continue selling the euro,"
said Lutz Karpowitz, currency strategist at Commerzbank. "First
of all, the escalating situation in Ukraine, which might lead to
further sanctions, thus increasing the risk of the euro zone
economy being affected by the crisis. Even more importantly is
the ECB rate meeting."
While Commerzbank does not expect the ECB to announce asset
purchases, or quantitative easing, when the governing council
meets on Thursday, the uncertainty about further policy action
is likely to keep the euro on the defensive, Karpowitz added.
The euro started September on a subdued note after posting
its second straight month of losses versus the greenback in
August, when it slid 1.9 percent following a 2.2 percent drop in
July. In fact, speculators' short positions against the euro are
near their highest in two years.
Analysts at Barclays said it was too soon for the ECB to
announce new policy measures, given that the two most powerful
policies announced in June are not yet deployed. ECB announced
targeted long-term repo operations and asset-backed securities
purchases in June that are set to be deployed in coming weeks.
"But a minority of market participants expect new policy at
this week's meeting. As a result, inaction may be greeted by
temporary relief from euro depreciation, but we would see any
short-term rallies as a selling opportunity," they wrote in a
The euro held steady above a near two-year low versus the
Swiss franc after the head of the Swiss National Bank (SNB),
Thomas Jordan said it stood ready to intervene in the currency
market to defend its cap on the franc.
The euro last stood at 1.2063 francs, staying
above last week's low of 1.2049 on trading platform EBS, its
lowest level versus the Swiss franc since late 2012. The SNB
introduced a 1.20 per euro cap in 2011 to prevent the franc's
strong appreciation from further hurting the economy, although
it has not had to defend the cap for the last two years.
Despite the global political tension, there was no
meaningful safe-haven bid for the yen. That saw the dollar edge
up 0.1 percent to about 104.15 yen.
The U.S. Labor Day holiday on Monday could dampen market
activity. Moves among major currencies were subdued ahead of
policy reviews by central banks in the euro zone, Japan,
Britain, Canada and Australia, all of which are coming up this
(Additional reporting by Masayuki Kitano; Editing by Alison