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The euro extended losses on Monday after repeated attempts to break above a resistance level failed, placing focus on renewed worries about euro zone debt problems and giving the dollar a much needed reprieve after heavy selling in the past few weeks.
The euro fell as markets grew uneasy after Finnish voters handed the anti-euro True Finns party a crucial role in parliament and possibly into government.
Finland's parliament, unlike others in the euro zone, has the right to vote on EU requests for bailout funds, meaning it could hold up costly plans to shore up Portugal and bring stability to debt markets.
Still, market players expect the common currency to be supported by prospects of another interest rate hike, after data showed euro zone inflation climbed higher than expected in March to 2.7% year-on-year.
"In the end, I think what it probably boils down to is that there are still some long positions in the euro," said Koji Fukaya at Credit Suisse Securities.
The euro's failure to hold above $1.45 suggests that a bigger near-term pullback may be in store. Earlier, the euro briefly dipped below support near $1.4365. A clear break of that level and the April 6 intraday high of $1.4350 could open the way toward a deeper drop. Possible downside targets include $1.4263 (23.6% retracement of the euro's February to April rally), and $1.4104 (38.2% retracement of the same move).
Meanwhile, the yen rose broadly, at one point hitting its highest in more than two weeks against both the dollar and the euro.
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