LONDON—A rally in the euro in Asian hours quickly reversed in European trade as investors continued to question how and whether the euro-zone crisis will be solved.
The euro shed almost a cent from its Asian session highs against the dollar, and also fell against the yen.
The single currency traded recently at $1.3833, compared with $1.3899 late Friday in New York. The dollar was at ¥76.17 from ¥76.19, while the euro was at ¥105.40 compared with ¥105.87. The pound slipped to $1.5920 from $1.5959.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 76.503 compared with 76.284 late Friday.
Sunday's summit of European Union leaders yielded no firm decisions on how a response to the euro-zone crisis would take shape. Rather, leaders admitted the last plan agreed upon only three months ago had failed.
A new effort will be finalized at another summit on Wednesday, which involves recapitalization of European banks, a substantial restructuring of Greece's debts, a bigger bailout fund and possibly fresh efforts to entice sovereign-wealth funds in China and elsewhere to come to Europe's aid.
"The summit provided very little detail," said Adam Myers, senior market strategist at Crédit Agricole. "The two-week risk rally we've seen in the market can't last. I expect to see a correction of the rally by Wednesday as the market wakes up to the fact that the euro-zone solution is another fudge."
Euro-zone data released early in the session added to market concerns that the sovereign-debt crisis is affecting Germany and France, along with the more debt-hobbled member states. The purchasing managers' index showed the euro-zone's private sector contracted at a faster pace in October to 47.2—the lowest level since September 2009—from 49.1 last month.
The euro's stumble against the dollar also dragged it lower against the yen, pushing the yen higher against the buck.
This grated nerves that Japan could launch a fresh intervention to weaken its currency, after the dollar fell to a fresh all-time low against the single currency of ¥75.78 late Friday.
Japanese officials are certainly working hard to remind traders that the risk of an intervention is real. "We will take resolute action against excessive speculative movements in the currency market," finance minister Jun Azumi said Monday. He added that Friday's yen move was "an absolutely speculative movement and did not reflect economic fundamentals at all".
In emerging markets, Turkey once again upped the ante in fighting currency weakness, promising to deliver a package of measures to support the lira Wednesday.
Looking ahead, Italian Prime Minister Silvio Berlusconi meets with ministers at noon ET to review demands from the EU that he must approve economic growth-boosting measures to flank the fiscal austerity program Italy approved last month. Israel also has an interest-rate decision, and some analysts see a possible rate cut.
