LONDON (Reuters) - The euro recovered much of the ground it had lost overnight in volatile trading on Monday, but was still 0.8 percent down against the dollar, after Greece took a step closer to a default and potential exit from the euro zone.
By 0659 GMT the euro was trading at $1.1089, still down 0.7 percent on the day but well clear of a four-week low at $1.0953 touched in Asian trading.
The single currency also recovered ground against the yen and Swiss franc in European hours, but was still down 1.7 percent at 135.985 yen. It had earlier traded as weak as 133.80 yen.
"There is uncertainty over whether the Grexit risks implied by the gap lower in euro/dollar at the start of the Asian session will actually be realised, with the Greek referendum still just under a week away," said Stephen Gallo, European head of FX strategy at BMO Capital Markets in London. "Contagion is definitely apparent but does seem reasonably limited so far."c
He also said that the dollar had probably suffered from a fall in U.S. yields, a result of a flight to safer assets by investors and concerns the U.S. Federal Reserve may not move as fast in raising interest rates if there is more turmoil in Europe.
The impact of the Greece crisis has been less clear in FX than in other markets, with some strategists saying that investor risk appetite has been driving the euro's direction - last week, it fell sharply on news that Greece and its creditors were getting closer to a deal.