Mon May 7, 2012 9:41am EDT

* Anti-austerity votes in Greece, France push euro lower
* Greece uncertainty biggest blow to common currency
* Euro break below $1.30 opens door to test of 2012 low

By Julie Haviv
NEW YORK, May 7 (Reuters) - The euro dropped broadly on
Monday after elections in Greece and France cast doubt on
politicians' commitment to austerity plans aimed at tackling the
euro zone debt crisis.
Renewed worries about the stability of the euro zone made
the euro pierce the key psychological level of $1.30 on its way
to hitting a three-month low against the dollar.
The euro also fell to its lowest in 3-1/2 years against the
British pound and a 2-1/2 month trough versus the yen, but trade
in the overnight session was quiet due to a UK holiday.
The biggest blow to the common currency was the Greek
election, in which the two main parties that support the
nation's international bailout failed to secure a parliamentary
majority. This threw into question the future of the program and
potentially the country's membership in the euro.

In early New York trade the euro rebounded from session
lows, with strong support around $1.2955, the 61.8 percent
retracement of the euro's rally from its January low to a high
in February.
"There is a lot of technical support at that level, so the
market has calmed down a bit," said Omer Esiner, chief market
analyst at Commonwealth Foreign Exchange in Washington.
In France, Socialist Francois Hollande, who has pledged to
balance the budget but more slowly than his opponent, ousted
centre-right incumbent Nicolas Sarkozy. The result could trigger
a push-back against German-led austerity across the euro
"Clearly damage has been done by this weekend's political
developments and euro support should dissipate in the days
ahead," Esiner said. "The euro will likely drop below $1.30
again and find a new range, perhaps between $1.26 to $1.28."
The euro sank to a session low of $1.2955, breaking
the $1.30 to $1.35 range it has been trapped in since late
January. It was last down 0.3 percent at $1.3046.
Uncertainty about the euro has grown over the past week as
evident in the options market, with three-month euro/dollar risk
reversals trading at -2.6 vols, unchanged from the
previous session but up from -2.250 vols a week earlier.

"The reaction in the foreign exchange market shows if it
really comes to the point where it's clear European politicians
will step back from austerity measures, that will be perceived
as very negative by financial markets," said Lutz Karpowitz,
currency analyst at Commerzbank.
"In Greece it's maybe the worst outcome we could have had
there. It looks impossible to find a government that will be in
favor of austerity."
The euro fell to 80.37 pence against the pound,
a level last seen in November 2008 after the Lehman Brothers
collapse. The common currency hit 103.23 yen, its
lowest since mid-February.
The U.S. dollar was up 0.1 percent at 79.92 yen,
having fallen back below 80 yen, seen as a support, on Friday
after disappointing U.S. jobs numbers.