January 5, 2015 / 12:46 AM / 6 years ago

Euro at near nine-year low on Greek worry, policy-easing bet

NEW YORK (Reuters) - The euro tumbled to near a nine-year low on Monday, undercut by growing concerns that Greek parliamentary elections will result in a left-wing government that will aim to cancel austerity measures along with a big portion of Greece’s debt.

Various Euro notes are pictured laying on a table in Warsaw February 24, 2012. REUTERS/Kacper Pempel

The left-wing Syriza party holds a narrowing lead ahead of Greece’s Jan. 25 general election over the conservative New Democracy party, opinion polls show. New Democracy imposed unpopular budget cuts under Greece’s bailout deal.

German Chancellor Angela Merkel’s spokesman said that her government was interested in stabilizing the euro bloc and retaining all of its members, including Greece.

Expectations for monetary policy easing in the euro zone, the opposite of a trend toward tightening policy in the United States, also cast a pall over the euro.

The dollar index, which measures the greenback against a basket of currencies, hit a nine-year high of 91.775 before easing to 91.342, still up 0.30 percent on the day. .DXY

“Markets expected further euro weakness this year and now with worries on the rise about Greece, that has compounded euro bearishness,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

The euro traded as low as $1.18605 on the EBS trading platform EUR=EBS in early Asian trade before steadying at $1.19445, a loss of 0.48 percent.

Manimbo said a break through $1.18 for the euro leaves it vulnerable to a drop to around the $1.1640 area, where there looks to be more support.

The euro’s decline coincides with data showing German inflation slowed to its lowest levels in over five years in December. That raises pressure on European Central Bank President Mario Draghi to unveil unconventional measures to ward off a deflationary spiral.

U.S. Federal Reserve minutes on Wednesday will be parsed for clues on when the central bank will drop its pledge to keep interest rates low for a considerable time.

Against the yen, the euro hit a two-month low of 142.27 yen EURJPY= before stabilizing around 142.81 yen, a loss of 1.25 percent on the day. The dollar dropped 0.73 percent to 119.60 yen. JPY=

Sterling was down 0.48 percent at $1.5252, having earlier fallen to a 17-month low of $1.5199 in New York trade. Against the Swiss currency, the dollar rose to a more than four-year high of 1.0108 Swiss francs. CHF=

Additional reporting by Patrick Graham in London; Editing by Louise Ireland, John Stonestreet, Peter Galloway and Dan Grebler

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