Forex News Review – Euro extends losses towards $1.25 on euro zone turmoil

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The euro sunk towards $1.25 in the U.S. session, touching a 22-month low against the dollar as concerns over the euro zone debt crisis and a Greek exit from the euro grew deeper. Hope that a meeting of EU leaders taking place this Wednesday night in Brussels would calm markets has faded. There is little conviction that the summit will provide any new measures to tackle the sovereign-debt crisis, which could result in Greece crashing out of the euro area.  Meanwhile, euro zone officials have told member countries of the single currency bloc to prepare contingency plans in case Greece leaves the euro.

EURUSD tumbled to 1.2544, which is the lowest level since July 2010, down 1 percent on the day. Investors turned to the dollar which is considered a safe haven during times of risk aversion, driving the U.S. dollar index to its strongest since September 2010.

GBPUSD extended its fall to 1.5674, the lowest level since March 15. Sterling took a hard hit after soft UK retail sales data earlier in the day, as well as BOE policy meeting minutes suggesting there was room for more QE.

High-yielding currencies like the Australian dollar fell sharply to a six-month low of 0.9688 in New York trading before retracing to 0.9771.

The Canadian dollar weakened against its U.S. counterpart on softer Canadian core retail sales data, and falling crude oil prices, which fell below US$90 today. Oil is a major Canadian export. USDCAD hit a new four-month high of 1.0294. Strong U.S. new home sales numbers gave the USD an extra lift in the North American trading session.

The safe haven yen remained firm. EURJPY dropped to 99.52, the lowest since February.  USDJPY fell to 79.20 in the U.S. session before trimming gains and rose back up to 79.52.