Investing.com - The euro was trading at one-year lows against the dollar on Monday as growing expectations for quantitative easing by the European Central Bank and tensions over the crisis in Ukraine weighed on the single currency.
EUR/USD hit lows of 1.3119, the weakest level since September 6 2013 and was last trading at 1.3135.
The pair was likely to find support at around the 1.31 level and resistance at 1.3195, Friday’s high.
The single currency was pressured lower amid mounting expectations that the ECB will implement fresh measures as a way to shore up long term inflation expectations after data last week showed that the annual rate of inflation in the euro area slowed to a five year low of 0.3% last month.
Concerns that sanctions against Russia would act as a drag on growth in the euro zone also continued to pressure the single currency lower.
Earlier Monday, Ukrainian troops lost ground around the eastern city of Luhansk following overnight clashes with pro-Russian rebels.
The conflict broke out in March after Russia's annexation of Ukraine's Crimea region.
Ukraine and the West blame Russian military support for the separatist’s gains in eastern Ukraine, claiming that Russian troops have entered the conflict to support them.
Over the weekend European Union leaders threatened to impose a new round of sanctions on Russia if Moscow does not end its support for the pro-Russian rebels.
Data on Monday confirmed that Germany’s economy contracted by 0.2% in the second quarter, in line with forecasts and unchanged from a preliminary estimate.
Separate reports showed that Germany’s manufacturing sector expanded at the slowest pace in 11 months in July, while factory activity in France contracted at the quickest pace in 13 months, adding to the view that the recovery in the region is losing momentum.
The euro was hovering close to 20 month lows against the Swiss franc, with EUR/CHF at 1.2071, not far from last Thursday’s trough of 1.2048.
In a newspaper interview published on Sunday, Swiss National Bank President Thomas Jordan pledged to enforce the minimum 1.20 per euro exchange rate floor imposed by the bank three years ago in order to stave off the threat of deflation and recession.
The euro pushed higher against the yen, with EUR/JPY rising 0.20% to 136.94.
Elsewhere Monday, the dollar touched its highest level since January against the yen, with USD/JPY rising to 104.29.
Trade volumes looked likely to remain light on Monday, with markets in the U.S. closed for the Labor Day holiday.