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Euro, Pound Drop On Evergrande Default Fears

The euro and the pound fell against their major counterparts during the European session on Monday, as European shares dropped on fears over the impact of potential fallout of Chinese company Evergrande on the broader economy.

The property giant's shares fell as it has defaulted interest payments on bank loans, intensifying fears about a credit crunch in the world's second largest economy.

The Fed's monetary policy decision is due this week, with markets seeking more clues about the withdrawal of the QE program.

Fed Chair Jerome Powell said that the tapering could happen this year depending upon the strengthening of the economy.

Other major central banks due to hold monetary policy meeting this week include the Bank of Japan, the Bank of England and the Swiss National Bank.

Data from Destatis showed that Germany's producer prices increased in August at the fastest pace since 1974.

Producer price inflation rose to 12 percent in August from 10.4 percent in July. This was the biggest growth since December 1974, when prices were up 12.4 percent amid the first oil crisis.

The euro depreciated to a 4-day low of 1.0897 against the franc, 4-week low of 1.1700 against the greenback and more than a 4-week low of 128.27 against the yen, down from its previous highs of 1.0935, 1.1731 and 129.03, respectively. The euro is seen finding support around 1.06 against the franc, 1.15 against the greenback and 126.00 against the yen.

The euro pulled back to 1.6657 against the kiwi, from a high of 1.6704 set at 3 am ET. On the downside, 1.65 is likely seen as its next support level.

In contrast, the euro rose to 1.5034 against the loonie, its biggest level since September 9. Immediate resistance awaits near the 1.52 level.

The euro jumped to more than a 3-week high of 1.6205 against the aussie in the previous session and held steady since then. The pair had ended Friday's deals at 1.6132.

The pound was lower at 4-week lows of 1.3662 against the greenback and 149.72 against the yen, off its early highs of 1.3750 and 151.15, respectively. The currency may locate support around 1.34 against the greenback and 146.00 against the yen.

Retreating from its previous highs of 0.8525 against the euro and 1.2810 against the franc, the pound slipped to near a 2-week low of 0.8571 and a 4-day low of 1.2726, respectively. If the pound slides further, it may find support around 0.87 against the euro and 1.25 against the franc.

Looking ahead, U.S. NAHB housing market index for September is scheduled for release in the New York session.

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