The euro fell broadly on Monday as European policymakers' lack of progress on the debt crisis at the weekend fueled concerns of a messy Greek default and fears that the problems could engulf larger euro zone economies and the region's banks.

The euro was down 1 percent on the day at $1.3664 and 104.82 yen as nervous investors added to bearish bets against the common currency after an unproductive meeting of finance ministers in Poland.

The euro hit a low for the day of $1.3634 on EBS trading platform, with traders citing talk of bids around $1.3630. However, analysts said near term it could test last week's 7-month trough of $1.3495 if Greek default fears grow.

There was nothing positive or constructive to come out of the European finance ministers' meeting and the market is bracing itself for the worst possible outcome, which is a disorderly Greek default, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange.

If Greece does default without a plan in place on how to deal with it then you don't want to be owning the euro.

Greece is set to run out of cash in October unless it can convince officials to release the next 8 billion euro tranche of bailout funding.

Greek Prime Minister George Papandreou's decision to cancel a visit to the United States to chair an emergency cabinet meeting at home and a regional election defeat for German Chancellor Angela Merkel added to the growing sense of gloom about the single currency.

Investors are now focusing on a conference call between Greece and its international lenders at 1600 GMT (12 p.m. EDT). The EU and IMF have presented Greece with 15 measures it needs to accelerate as a condition for accessing the next tranche of bailout funds, Greek media said.

A lack of direction will raise questions about solvency, said Lena Komileva, global head of G10 currencies at Brown Brothers Harriman. We expect the euro to retest the September 12 low of just below $1.35 in coming days.

The euro dipped below its support level near $1.3664, the 61.8 percent retracement of last week's rally to $1.3937 from a seven-month trough of $1.3495. The next Fibonacci support lies near $1.3599, the 76.4 percent retracement of the same rally, with more support at its September 14 intraday low near $1.3590.

BULLISH ON DOLLAR; FED EYED

Data from the Commodity Futures Trading Commission showed speculators sharply increased short positions in the euro, pushing the net total short position to 54,459 contracts in the week to September 13.

Speculators also added to bullish bets on the dollar for the first time since July 2010. The greenback has been supported by a renewed flight to safety, a jump in stock market volatility and expectations the Federal Reserve will not resort to more quantitative easing.

UBS said their flow data suggested asset managers were the main drivers of the increasingly negative flow in euro/dollar.

Euro/dollar implied volatilities rose, particularly given the event risk ahead with a Fed meeting this week and the decline in the spot euro. One-month rose to 15.75 percent from around 14.5 on Friday.

Risk reversals also showed a rising premium to buy options betting on a weaker euro versus the dollar. The one-month 25-delta risk reversal was at about 3.0 in favor of euro puts, up from 2.6 on Friday.

The Fed begins a two-day policy meeting on Tuesday amid talk it will take further monetary easing measures, such as lengthening the maturity of its debt holdings, an option traders refer to as Operation Twist.

The dollar rose broadly, climbing 1 percent versus the Swiss franc to 0.8860. The dollar index was up 0.6 percent at 77.086, not far from its seven-month high of 77.784.

Although the market sees little chance the Fed will adopt a fresh asset-buying program this week, any signal that it will expand its balance sheet if data continues to disappoint could provide some support to risk appetite in coming weeks. Analysts also said Operation Twist, unlike QE, could underpin the dollar in the short term.

We are constructive on the dollar in the medium term and it seems increasingly likely that the Fed will resort to extension of maturities rather than its balance sheet, said Chris Walker, currency strategist at UBS, adding the dollar index could rise to 80 in the next two weeks.

Commodity currencies came under pressure as stock markets and financial shares were deep in the red with the Australian dollar falling more than 1 percent to $1.0213.