Euro hits a nine-year low amid exit fears by the Greeks
The euro sank to a nine-year low yesterday amid deepening fears about a Greek exit from the single currency and the increasing likelihood of a full-blown round of money-printing stimulus by the continent's policymakers.
It dipped to below $1.19 at a level not seen since December 2005 before recovering slightly.
Sterling also climbed, trading near to six-year highs against the euro seen at the end of last week and boosting the spending power of UK holidaymakers preparing for breaks in the likes of Spain, France or Italy.
The latest fall in the single currency comes after a report in Germany said chancellor Angela Merkel no longer believed it would be too risky for the troubled 19-member bloc should Greece leave.
Fears over the country, which was at the heart of the eurozone debt crisis in 2010, have ramped up in recent weeks.
Traders are weighing up the prospect that the anti-austerity Syriza party could win forthcoming elections, raising doubts about the country's commitment to the terms of its international bailout and its position within the euro bloc.
The euro has also been under pressure over the prospect of a full-blown quantitative easing programme to stimulate the region's moribund economy, deepened by reported remarks by European Central Bank president Mario Draghi last week.
Europe has yet to follow the UK and US into buying government bonds, preferring instead to slash interest rates to 0.05%.
But data this week could see the eurozone sliding into deflation, underlining the need for further action to try to pump up activity.
Yesterday, sterling climbed to more than €1.28.
It had passed €1.29 on Friday to reach its highest level since October 2008 before being weighed down by disappointing UK manufacturing and mortgage approval data.
The pound is now worth about seven cents more than it was a year ago.