WORLD FOREX: Euro Drops Below $1.35 On Greece Bailout Doubts

TORONTO, The euro slumped in mid morning trading Monday after a top Greek official said the future of the European Union is at stake if European leaders don't come up with a credible package to help Greece.
The euro plunged through the $1.3500 mark and hit a session low at $1.3463, its lowest level since March 2, after Greece Deputy Prime Minister Theodore Pangalos warned that if EU leaders fail to address the problem it will harm the integrity of the euro zone.
Speaking at a conference Monday, Pangalos called on European leaders to show their resolve during a summit this week by presenting a credible package to deter speculation against Greek government bonds. "If there is no tool, no weapon on the table...if the speculators are not worried about losing anything, then the euro has no meaning," Pangalos said.
The euro was already being pressured by the Greek situation in earlier trading.
"Clearly, sentiment is weighing on the euro with increased uncertainty about the Greek bailout by the European Union, and increasing uncertainty that will not materialize," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
Technical factors accelerated the euro's decline once it broke below $1.3500, he said. There's crucial technical support for the euro at $1.3405, Strauss said.
During mid morning trading Monday, the euro was at $1.3476 from $1.3535 and at Y121.29 from Y122.47, according to EBS via CQG. The dollar was at Y90.00 from Y90.50. The dollar was also at CHF1.0647 from CHF1.0610 while the pound was at $1.4984 from $1.5016.
The ICE Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was at 80.976 from 80.740. The euro was at CHF1.4352 from CHF1.4361.
Currency markets remain on alert for intervention from the Swiss National Bank as the euro sinks even further toward CHF1.43. Some analysts warn the Swiss central bank could be faced with an even more difficult task of halting the franc's rise if the euro slides below that October 2008 low.
Initially, the dollar benefited and the euro fell as the market digested a weekend interview by German Chancellor Angela Merkel, in which she denied any plans to help Greece.
She warned against raising "false expectations" in financial markets that a solution will be found at the European Union summit starting this Thursday. She said Greece hadn't asked for any funding and that the issue isn't on the agenda for the summit.
But Merkel is open to aid for Greece from the International Monetary Fund in an emergency, her spokesman said Monday.
"In this case, financial aid from the IMF is definitely a topic for the chancellor and the German government," spokesman Ulrich Wilhelm said Monday.
Currency markets were also rocked by events on the other side of the world Friday when India announced a surprise increase in interest rates, bringing speculation that other robust emerging markets, especially those in Asia, will follow suit. The prospect of reduced global demand hit commodity prices and added to downward pressure on global stock markets.
The pound, meanwhile, wasn't getting much help from the latest weekend polls showing that the opposition Conservative Party's lead is still around six basis points, and that a hung parliament remains the most likely outcome of an election.