Euro sinks on new Greek debt worries

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LONDON: The euro fell heavily on Monday, striking a two-month low against the dollar, as Greek debt worries resurfaced with a bang and as data pointed to slowing economic growth across the eurozone.

The European single currency tumbled to $1.3982 in London trading from $1.4155 late in New York on Friday. Monday's level was the lowest since March 18.

Against the Japanese currency, the dollar dropped to 81.52 yen from 81.70 yen on Friday.

"The Eurozone debt and banking crisis continues to deteriorate with recent newsflow highlighting credit rating downgrades and differences of opinion amongst EU policymakers over the contentious issue of Greek debt restructuring," said Neil MacKinnon, an analyst at VTB Capital.

Ahead of the weekend, ratings company Fitch slashed Greece's rating by three notches to B+, citing its growing problems in getting its public finances in order.

European partners are pushing the government in Athens to press the button on 50 billion euros of public asset sales in exchange for lessening the burden on the existing bailout.

Meanwhile rising concerns emerged on Monday over the state of European economic recovery -- with key indicators slowing sharply, and eurozone stragglers behind Germany and France showing signs of stagnation.

London-based research giant Markit's composite eurozone index for manufacturing and services output suggested eurozone growth slowed to a seven-month low in May.

Its index fell from 57.8 in April to 55.4 this month. Any score above 50 indicates growth, and May marked the 22 successive months of economic expansion. But the deceleration in the rate of growth was also the largest since November 2008, Markit said.

"It is not clear the extent to which this reflects temporary factors such as the timing of Easter and disruptions to supply chains emanating from the earthquake in Japan," said Chris Williamson, Markit chief economist, a view backed by external economists.

"But a deterioration in business confidence in the service sector to the weakest since July 2009 suggests that a more fundamental slowing in the pace of economic growth is occurring."

In London on Monday, the euro changed hands at $1.3982 against $1.4155 late in New York on Friday, at 114.06 yen (115.66), #0.8682 (0.8715) and 1.2336 Swiss francs (1.2421).

The dollar stood at 81.52 yen (81.70) and 0.8834 Swiss francs (0.8772).

The pound was at $1.6115 (1.6236).

On the London Bullion Market, gold prices grew to $1,510.43 an ounce from $1,491 late on Friday. (AFP)