The euro fell against the dollar and yen after data showed that the euro zone contracted in the fourth quarter. Losses were extended after a report from the IIF ( which brokered the Greek PSI debt swap), warned that a default by Greece would result in 1 trillion euros worth of damage to the euro zone.
By 11:00 GMT, EURJPY plunged to a three-week low of 106.18 versus the European session open price of 107.47. EURUSD dropped to 1.3130 from an earlier high of 1.3207.
Data released by Eurostat showed that gross domestic product across the euro zone euro zone contracted by 0.3 percent in the fourth quarter of 2011. When compared to Q4 of 2010, GDP grew by 0.7 percent back then.
Although the data was in line with forecasts, the uncertainty of the Greek debt swap deal is dampening risk appetite and weighing heavily on the single currency. In the event of a default by Greece, this would likely force Italy and Spain to seek a bailout as well, which would in turn cause huge problems to the whole euro area.