SINGAPORE-The euro slumped to a fresh 15-month low against the dollar on renewed euro-zone debt worries, but recovered modestly later Monday, as eyes turned to a key meeting between the heads of state of Germany and France.
France's Nicolas Sarkozy and Germany's Angela Merkel will meet in Berlin Monday to begin preparations for a European summit later this month.
No specific announcements or breakthroughs are expected from the meeting, but investors hungry for cues might seize on the atmospherics of the meeting for direction. "Any sign of discord would be taken negatively for the euro," said David Forrester, G-10 currency strategist at Macquarie Group.
Early in the Asian day, a pair of reports from European news outlets set a gloomy scene for risk-off trade Monday. German magazine Der Spiegel cited an International Monetary Fund note that showed growing doubts about Greece's long-term ability to reduce its debts. And Czech central bank Governor Miroslav Singer was quoted by a local daily as saying Greece should quit the euro zone, according to Reuters.
U.S. weekly Commitments of Traders data released Friday indicate that traders have recently added to their already heavy short-euro positions. That could create some upside for the euro, but analysts said downside risks are greater given the Merkel-Sarkozy rendezvous and ECB meeting later this week.
"There's plenty of fuel for an unwind of euro shorts, but it's very difficult to see what would intervene to drive the euro higher," said Robert Ryan, currency strategist at BNP Paribas.
Asian currencies also declined against the dollar as equity markets in Seoul, Taipei and Singapore opened the week lower.
The Australian dollar tumbled after November retail sales data came in weaker than expected. The Aussie dollar was at $1.0178 at 0615 GMT, down from $1.0229 late in New York Friday.
The euro was at $1.2710 at 0615 GMT, off its intraday low of $1.2668, which was also the common currency's lowest level against the dollar since September 2010. It traded at Y97.76 at 0615 GMT, after reaching a 12-year low of Y97.31 earlier Monday.
