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The euro slid to its lowest level since January on Tuesday as investors reacted negatively to reported comments by Angela Merkel, German chancellor, that no further money would be made available for the European Stability Mechanism, Europe’s new bail-out fund.

After the US Federal Reserve left policy steady at mid-afternoon in New York the single currency fell more than 1 per cent to $1.3010, a new low for the session.

The losses for the euro began earlier after Ms Merkel reportedly reiterated that the European Central Bank would not become a lender of last resort, in comments made shortly before London markets closed, following a day of quiet trading.

Traders said that low volatility in the markets had exacerbated the falls.

The euro weakened against other leading currencies. It fell 1.2 per cent against the yen to Y101.77 and 0.6 per cent in relation to the pound to £0.8413, continuing its downward trend from the previous day when it hit a nine-month low against sterling.

Steven Englander at Citi said the volume of selling was relatively low in end-of-year trading, with traders putting on short-term positions in response to the dip but few longer-term positions being added.

Sebastien Galy at Société Générale said companies were very reluctant to short the dollar and long the euro towards the end of the year, amid general uncertainty about the eurozone. “The credibility of the European response is very much in doubt driving euro/dollar lower,” he said.

Commodity currencies, which had regained some of their strength earlier in the day following heavy losses on Monday, followed the euro down amid the negative sentiment.

The Australian and New Zealand dollars gave up their gains to fall 0.9 per cent and 1 per cent respectively, to $0.9984 and $0.7558 against the US dollar.

The Norwegian krone suffered heavy falls after an initial rise, moving down 1.5 per cent to NKr5.9156, while the Swedish krona was down 1.2 per cent to SKr6.9544.

The Swiss franc was stronger against the euro but fell against the dollar as investors prioritised liquidity.

The franc declined 1 per cent to SFr0.9468 against the dollar while the euro fell 0.3 per cent to SFr1.2315.

Copyright The Financial Times Limited 2017. All rights reserved.

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