(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 versus
the dollar on Monday, as investors added to bets against the
single currency before the European Central Bank's monthly
policy meeting this week.
Worries about the impact on the euro zone's fragile recovery
of the crisis in Ukraine also weighed on the currency, which
fell as far as $1.3119 in Asia, lows not seen since Sept.
2013. It last traded at $1.3134, flat on the day.
The euro also hit a five-week low against the British pound
of 78.92 pence before recovering after
softer-than-expected UK factory data.
Trading volumes are expected to ease off later given the
Labor Day holiday in the United States.
Data on Monday showed factory activity across the euro zone
cooled in August as the conflict between Russia and Ukraine took
The PMI survey for Germany, Russia's biggest trade partner
in the European Union, fell to an 11-month low, while the index
for France fell further below the 50 mark that separates
expansion from contraction.
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
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
important 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.
HUGE BEARISH BETS
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. 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 - new long-term loans for banks and
asset-backed securities purchases - have not yet been deployed.
"But a minority 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 note.
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 was at 1.2065 francs, staying above last
week's low of 1.2049 on trading platform EBS, its lowest 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
hurting the economy, although it has not had to defend the cap
for the last two years.
The Swedish crown fell to a three-week low against the euro
after Sweden's manufacturing sector PMI fell more
than expected in August. The Riksbank meets later this week, but
is unlikely to do much, having lowered the repo rate by 50 basis
points in July.
Despite the political tension, there was no meaningful
safe-haven bid for the yen. That saw the dollar edge up 0.2
percent to about 104.25 yen.
(Editing by Catherine Evans)