IMF Arrest Causes Euro's 7-Week Low

Reuters reports

The euro fell to a seven-week low against the dollar and a two-month trough against the yen on Monday and is seen testing pivotal support areas after IMF chief Dominique Strauss-Kahn was charged with attempted rape on the weekend, increasing uncertainty on aid for Greece and other indebted euro zone countries.

The shocking news on Strauss-Kahn, who had been seen as a front runner to be France's next president, soured investor risk appetite, which had already been strained by a rout in various commodities and falls in share prices in the past two weeks.

"This came at a really bad time for the euro as it could delay efforts to put together a rescue package for Greece. It's adding salt to their wounds," said Tsutomu Soma, manager of foreign bonds at Okasan Securities.

Strauss-Kahn had been due to meet German Chancellor Angela Merkel on Sunday and join euro zone finance ministers on Monday to discuss the bloc's debt crisis and how to handle Greece, which is struggling to meet the terms of a 110 billion euro European Union/IMF bailout last year. His lawyers said he would plead not guilty to the charges against him.

The euro fell as far as $1.4048 EUR=, its lowest since March 30, having dropped 6 percent from a 17-month peak of $1.4940 hit less than two weeks ago.

Still, investors were careful about selling the European currency further as $1.40 appeared to be an important psychological level.

"A slew of euro-selling that we've been seeing could slow down from here. The pessimism over Greece and the latest news triggered massive euro sales, but recent moves have been a bit too rapid," said Makoto Noji, currency analyst at SMBC Nikko Securities.