The euro fell half a percent on Tuesday, as investors sold the currency after its best three-day performance in nearly two years, as sources said the European Central Bank was unlikely to ditch a pledge to keep buying bonds at next week's meeting.
Bitcoin slid as much as 18% to a four-week trough near $11,000 after reports suggested it was still possible that South Korea could ban trading in cryptocurrencies, driving fears of a wider regulatory crackdown. Other cryptocurrencies also plunged.
The euro fell to as low as $1.2208, down half a percent on the day, having already faced pressure from the uncertainty about German Chancellor Angela Merkel's efforts to form a "grand coalition" in parliament.
Members of the center-left Social Democrats (SPD) in one of Germany's region voted against talks with Chancellor Angela Merkel's conservative Christian Democrats (CDU) on Monday, and fresh headlines on that development triggered a fall in the euro in early European trading on Tuesday.
The single currency fell further after Reuters reported that ECB rate-setters needed more time to assess the outlook for the economy and the euro before changing its policy message, according to three sources close to the matter.
The euro had climbed 2.7% since Thursday, making gains not seen since February 2016, and hit as high as $1.22965 on Monday, its strongest since December 2014.
"This is just some pull-back after strong gains in recent days, and some headline risk came through this morning today raising concern over whether the new government would be formed in Germany," said MUFG currency analyst Lee Hardman, in London.
"I don't think that's a big deal for the euro but the fact the euro did weaken on the news just highlights the fact that we've had very strong gains in recent days so there's just a risk of a small correction," Hardman said.
Speculators boosted net long positions in the euro to a record high in the week to Jan. 12, according to futures data published on Friday.
The single currency has been bought on optimism about the euro zone's economic outlook and expectations for the European Central Bank to wind down its massive monetary stimulus.
Although the euro's strength has raised concerns that it could encourage the ECB to talk down the currency, there has been little sign of such push-back from the ECB, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.
The dollar's index against a basket of six major currencies climbed 0.3% to 90.509, up from Monday's three-year low of 90.279, with the U.S. currency helped by the pull-back in the euro.
Against the yen, the dollar rose 0.2% to 110.75 yen , edging away from Monday's four-month low of 110.32 yen. (Reuters)
Source: www.businessworld.ie
