LONDON: The euro fell to a 21-month low against the dollar on Wednesday as investors added to bearish bets on growing concerns about a chaotic Greek exit and widespread scepticism about the outcome of an EU summit due later in the day. EU leaders are expected to discuss growth-boosting measures but are not expected to produce any plan that would restore optimism among investors, especially given Germany remains strongly opposed to joint euro bonds. Investors are doubtful that the leaders will come up with any measures to calm fears that have grown since an inconclusive Greek election earlier this month left the country on the path to bankruptcy and a possible exit from the euro zone. The euro fell to $1.2615 on trading platform EBS, dropping below the 2012 low of $1.2624 set in January to mark its lowest since August 2010 as real money investors, corporates and macro funds stepped up euro selling. Traders reported an option barrier at $1.2600 with stop-loss orders below $1.2575. It was last trading at $1.2650, still down 0.2 per cent on the day, with option expiries at $1.2650 and $1.2725-30 likely to check gains. "The euro's downtrend is entrenched and we think there are too many risks of potentially nasty outcomes in the euro zone, especially with regard to what will happen to Greece," said Ned Rumpeltin, currency strategist at Standard Chartered. "We expect the euro to be at $1.25 by the end of the quarter, but today's close will be very important in the short term. If there is a bounce, we will see the euro consolidating a bit more, but if we end near today's lows, then we should see it weaken further. In any case the euro is a sell on a rebound." Fears that Greece may have to leave the euro grew after Dow Jones earlier quoted former prime minister Lucas Papademos as saying Greece had no choice but to stick with a painful austerity programme or face a damaging exit from the euro zone. His clarification in a television interview later offered little respite to the struggling euro, which has shed 4.5 per cent against the dollar so far this month. Apart from concerns about political uncertainty in Greece, investors remain edgy about the potential for the crisis to spread and troubles in the Spanish banking sector. "From a medium term perspective, the risk reward is a significant downside for the euro from current levels," said Howard Jones, advisor at RMG Wealth Management. "There is considerable risk things in the euro zone can unravel, and that of contagion. It all points to a weaker euro and maybe euro zone governments will welcome that."

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