The euro fell from recent highs after a eurozone official warned the currency may be too strong, sparking concerns that it could hamper the region’s economic recovery.

The euro dipped against the dollar, the pound and the yen after Pierre Moscovici, France’s finance minister, said at the weekend that the single currency was stable and strong – “perhaps even too strong in certain respects”.

Concerns over political instability in Spain were also weighing on the single currency as Spain’s borrowing costs rose following allegations of corruption in the government.

Last week, the euro touched a 15-month high against the dollar, rising above $1.37 for the first time since November 2011 as investors returned to the eurozone on optimism the crisis has abated.

On Monday, however, the euro fell 0.8 per cent against the dollar to $1.3521 and 1.1 per cent against sterling to £0.8588. The single currency also dipped 1.1 per cent against the yen to Y125.07, having touched its highest level in nearly three years against the Japanese currency the previous week.

Haven currencies strengthened, with the Swiss franc touching its highest level in three weeks against the single currency, which fell 0.7 per cent to SFr1.2281. The dollar fell 0.1 per cent against the yen to Y92.65.

The dip in the euro came as investors looked ahead to the European Central Bank’s monthly meeting on Thursday with Mario Draghi, ECB president, expected to face questioning on how the central bank viewed the recent sharp gains in the single currency.

“The longer term risk to the euro, in our view, is that peripheral yields undergo a renewed rise, challenging these economies and weighing on growth,” said analysts at Morgan Stanley.

The New Zealand dollar was higher even as New Zealand’s prime minister warned that the country’s currency was too strong against its US counterpart.

The so-called Kiwi traded at its strongest levels since September 2011, hitting $0.8492 against the US dollar. The Australian dollar rose ahead of a decision from the Reserve Bank of Australia on whether to cut interest rates on Tuesday, with a minority expecting a 25 basis point cut. The Aussie rose 0.2 per cent against the US dollar to $1.0441.

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