The euro sank to a 10-month low against the dollar and a lifetime trough versus the Swiss franc on Wednesday as speculation Greece may have a difficult time securing debt aid highlighted instability in the euro zone.

European shares hit their highest since October 2008, following a climb in U.S. stocks, but broader global shares slipped as traders were cautious about taking on big positions ahead of a European Union summit which begins on Thursday.

EU Monetary Affairs Commissioner Olli Rehn on Wednesday said the union must decide on a way to help debt-laden Greece this week, or run the risk of causing a serious disruption for the euro.

His comments came after Germany on Tuesday signaled for the first time that it may accept European financial aid for Greece as a last resort, but only if the IMF is involved and euro zone partners accept tougher budget discipline rules.

Germany had been holding out against proposals to offer Greece bilateral loans because opinion polls show Germans do not want Berlin to be the main paymaster.

At the same time, France had rejected a possible role for the International Monetary Fund, arguing instead for euro zone members to help Athens.

Analysts said the euro may be vulnerable to more losses even if the two-day summit results in an assistance package for Greece, as the prospect of any IMF role in such aid may be seen as acknowledgement of weakness in the euro system.

The uncertainty over an aid package for Greece is clouding judgment toward the euro. Even if the IMF comes in, it shows the EU is not able to help itself, said Antje Praefcke, currency strategist at Commerzbank.

By 0912 GMT, the euro had fallen 1 percent on the day at $1.3352, according to Reuters data, hitting its lowest since May 2009.

The euro stumbled despite a stronger-than-expected reading of the Ifo Institute's survey of German business sentiment.

The single European currency traded at 1.4280, after sinking as low as 1.4232 Swiss francs on EBS, the euro's weakest since its launch in 1999.


The dollar index <.DXY> hit a 10-month high of 81.574 as jitters ahead of the EU summit prompted traders to sell currencies perceived to be higher risk for the safe-haven dollar, which also pushed it to a one-month high versus the yen. Diminishing risk appetite sent the MSCI world equity index <.MIWD00000PUS> down 0.2 percent to 306.14, while U.S. crude oil prices fell 1.3 percent.

But the FTSEurofirst 300 index <.FTEU3> rose as high as 1,077.61 in early trade, hitting its highest since October 2008 on the back of higher bank shares.

Analysts said European shares were also taking a cue from their U.S. counterparts, which rallied to 18-month highs on Tuesday.

London's FTSE index <.FTSE> was little changed on the day while sterling fell against the dollar ahead of the final UK budget before a national election expected in May.

Markets will watch the budget more for its effect on opinion polls than its economic measures, but there is still plenty of scope for stocks and government bonds to move on the detail of what is announced.

(Additional reporting by Neal Armstrong, editing by Patrick Graham)