Weak German economic figures and the resignation of the French
government following a row over fiscal policy added to the bearish
mix for the euro.
The shared currency was trading at 1.2080 Swiss francs, having
fallen to 1.2072 francs on Monday, its lowest since early January
2013 on trading platform EBS.
Its drop could test the Swiss National Bank's three-year old pledge
to cap the franc at 1.20 per euro.
"I haven't heard anything about the SNB changing its commitment to
the 1.20 floor and I don't expect it to," said Marshall Gittler,
head of currency strategy at IronFX Global.
"That means the risk/reward ratio for long euro/Swiss franc
positions is about as good as it gets right now. The rate can go
somewhat lower and of course the SNB is not required to notify
investors before changing its strategy. But past performance ...
does suggest they will keep the rate above 1.20."
Against the dollar, the euro was subdued at $1.3198, having dropped
to $1.3178 in Asian trade, its lowest in nearly a year. Following
dovish comments from the European Central Bank chief at the weekend,
German business sentiment data on Monday sagged for a fourth month
Investors betting on more euro weakness are now waiting for euro
zone inflation data on Friday. Analysts polled by Reuters expect
annual inflation to have slowed to 0.3 percent in August from 0.4
percent in July. That would be well below the ECB's danger zone of
1.0 percent and its target of just under 2.0 percent.
Late on Friday, in stronger language than he has used in the past,
ECB President Mario Draghi said the ECB was prepared to respond with
all its "available" tools should inflation drop further.
Those comments have triggered speculation that the ECB may be
prepared to ease policy further, driving bond yields to lows.
In contrast to Draghi, Federal Reserve Chair Janet Yellen on Friday
acknowledged the concerns of some Fed officials about the sustained
level of monetary policy stimulus, even as she stressed the need to
move cautiously on raising rates.
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While that meant higher short-term U.S. rates would bolster the
dollar's allure, it comes amid the spectre of slowing growth in the
euro zone, making the bloc's assets less attractive to investors.
"Over the past year, the euro has remained firm because investors
have had a great inclination to increase their European portfolio
holdings as the ECB has successfully stabilised the euro zone,"
Robert Bergqvist, chief economist at SEB, wrote in his Nordic
"This factor is now fading in strength, which will later lead to a
continued weakening of the euro against the dollar. We expect the
euro at $1.30 at the end of 2014."
The dollar index slipped as investors booked profits after two days
of gains in the wake of Yellen's comments at Jackson Hole. It held
close to its September 2013 peak of 82.671. A break there will take
it back to highs not seen since July last year.
Against the yen, the dollar dipped 0.2 percent to 103.85, having
peaked at a seven-month high of 104.49 overnight.
Investors will look to U.S. durable goods orders data later in the
day, with forecasts for a 7.5 percent rise in July from a month
earlier. Traders said if U.S. yields rise on stronger-than-expected
data, it could push the dollar higher.
(Editing by Hugh Lawson)
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