The broadly weaker euro fell to session lows against the dollar and the yen on Monday after the European Central Bank warned that further gains in the euro exchange rate will prompt fresh stimulus measures.
EUR/USD was down 0.45% to 1.3822, from 1.3883 on Friday. The pair rose 1.3% last week, the strongest weekly performance since September.
The pair was likely to find support at 1.3795 and resistance at 1.3862.
The euro weakened broadly after ECB President Mario Draghi said Saturday that further gains in the euro would trigger additional monetary easing to keep inflation from falling.
'A strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for our price stability,' he said.
ECB governing council member and Bank of France governor Christian Noyer said Monday that a weaker euro is desirable; adding that the stronger the currency is the more 'accommodating' monetary policy needs to be.
Data last month showed that the annual rate of inflation in the euro area slowed to 0.5%, well below the ECB’s target of just under 2%. The central bank kept monetary policy on hold unchanged earlier this month, but said it would consider unconventional measures if needed to prevent low inflation from becoming entrenched in the euro zone.
The shared currency shrugged off data showing that industrial production in the euro area rose 0.2% in February from a month earlier, pushing the annual rate up to 1.7%.
Market expectations had been for an annual gain of 1.5% and a monthly increase of 0.2%.
The euro fell to session lows against the safe haven yen, with EUR/JPY down 0.40% to 140.54.
Market sentiment was hit as tensions over Ukraine mounted on Monday after a deadline set by Ukraine’s government for pro-Russian separatists to leave government buildings they are occupying in eastern Ukraine expired.
The U.S. has indicated that it is prepared to impose more sanctions against Moscow if Russian encroachments in eastern Ukraine continue.
The shared currency was also weaker against the pound, with EUR/GBP dropping 0.38% to 0.8267.