(Reuters) - The euro fell to an all-time low against the Swiss franc on Wednesday after triggering a wave of sell orders, and also hit a 10-month low on the dollar as doubts that any solution for Greece would be smooth kept it locked in a downtrend.
Selling against the Swiss franc quickly lost momentum once it hit a record low of 1.4232 francs, as traders grew wary that the Swiss National Bank may step in to slow its fall.
Speculative accounts and a big German bank were said to have sold, setting off stops, before caution set in with talk that the market could be getting quite short on euros which would make it vulnerable to a snap back if the SNB were to intervene.
But a later wave of selling against the dollar plunged the euro to $1.3403, its lowest since early May, and it smashed support at $1.3430 before buying linked to an options barrier said to be at $1.3400 gave it a temporary floor.
"The euro's heaviness stems from concerns about the euro zone system -- whether it is functioning properly to back the credibility of the single currency -- and this is an even bigger problem than Greek debt woes," said a sales trader for a Japanese bank.
The euro dropped 0.6 percent to $1.3416. Traders said there had been stop-loss sell orders at $1.3430, which once triggered extended the euro's losses in a downtrend that has seen it shed 6 percent against the dollar this year.
EU leaders hold a summit on Thursday and Friday, and Germany has signaled for the first time that it may accept European financial aid for Greece as a last resort.
But it has pegged its support to several conditions, including the need for the International Monetary Fund to make a "substantial contribution.
Analysts said uncertainty over aid for Greece, combined with lackluster euro zone economic growth, could prevent the European Central Bank from raising interest rates until well into next year, a prospect also likely to weigh the single currency down.
"Be it the EU or the IMF, how either of them would rescue Greece remains uncertain. The euro looks set to trade defensively in the near term," said Masafumi Yamamoto, chief forex strategist at Barclays Capital in Tokyo.
EURO/SWISS GIVES WAY
The euro fell 0.2 percent on the day to 1.4246 francs.
Dealers said the euro could eventually slide further, even though many expected the SNB would step in at some point, and some reported loss-cutting sell orders down to just below 1.42.
"The SNB will likely continue to intervene, but that will now be used to smooth levels rather than change them," Tsutomu Soma, senior manager at Okasan Securities in Tokyo.
"At this rate, despite some rebounds, the pair looks to be headed toward 1.40."
The Swiss central bank is suspected of intervening in the forex market over the past year as part of its efforts to protect the Swiss economy.
SNB Chairman Philipp Hildebrand said on Tuesday it would keep fighting excessive appreciation of the franc to prevent deflation surfacing, but analysts said it would probably shy away from large-scale intervention as the economy recovered and it moved toward normalization of monetary policy.
Against the yen, the euro dropped 0.5 percent to 121.60 yen, and the Japanese currency edged up against the higher-yielding Australian and New Zealand dollars.
The greenback firmed 0.2 percent to 90.52 yen and on its broader index .DXY, a gauge of its performance against six other major currencies, it rose 0.4 percent to 81.210, coming within sight of February's eight-month high of 81.342.
The New Zealand dollar dropped against the greenback after data showed the country's annual current account deficit narrowed in the fourth quarter, but the improvement was not as strong as expected.
The kiwi fell 0.3 percent to $0.7032.
(Additional reporting by Kaori Kaneko and Charlotte Cooper)
