The euro slipped back close to a three-week low on Thursday, hurt by jitters over Greece's plan for a referendum on the eurozone debt deal, with market players seeing the risk of more downside in the next couple of months.
The euro retreated as attention shifted back to Greece after the US Federal Reserve offered no new stimulus on Wednesday, saying it was mulling the possibility of buying more mortgage debt to spur a struggling recovery.
The single currency fell 0.4 percent to $1.3687 , nearing a three-week low of $1.3608 hit this week. Further below, one possible support lies at $1.3566, the 61.8 percent retracement of its October rally.
"We're negative on the euro. There are very few scenarios in my mind where the euro can rally significantly," said Adarsh Sinha, Asia-Pacific G10 FX strategist at Bank of America Merrill Lynch in Hong Kong.
Positive scenarios, such as European officials and the International Monetary Fund agreeing to unconditionally fund Greece while it sorts out its domestic politics, are very unlikely, Sinha said.
Indeed, German Chancellor Angela Merkel and French President Nicolas Sarkozy told Greece on Wednesday it would not receive another cent in European aid until it decides whether it wants to stay in the eurozone.
"Our central scenario is the euro moves towards $1.30 by year-end," said Bank of America Merrill Lynch's Sinha, adding that the euro could drop further if there is an extreme outcome, such as Greece leaving the eurozone or if there is a disorderly default of Greek debt.
Adding to the market's risk-off tone, the Australia dollar slid 1 percent to $1.0238 , its drop exacerbated by selling by options players.
Traders said low market liquidity likely helped to exaggerate the moves in the Australian dollar and the euro, with Tokyo players away for a Japanese public holiday on Thursday.
The dollar was stuck in a narrow range against the yen, holding steady at 78.05 yen . The focus is on whether Japan will intervene if the yen starts heading higher again after Tokyo's massive yen-selling on Monday, estimated at a record 7.7 trillion yen.
The euro has taken a hit this week after Greece's prime minister said that Greece would hold a referendum on a second bailout plan negotiated with eurozone leaders last week.
Investors are worried Greek voters could vote down the rescue plan, raising the possibility of a disorderly default by Greek debt.
Markets took no comfort in the latest headlines on Greece. The Greek prime minister said the referendum will take place on Dec. 4 or 5, meaning another four weeks of uncertainty.
"Although further developments in the euro debt saga are likely to trigger more market volatility, a possible slowdown in the real economy, as indicated by the recent release of euro area PMIs, will be more of a concern medium-term," Barclays Capital analysts warned.
"We think a slowdown would keep weighing on the euro, even if risks from European debt issues decline temporarily."
For many, the European Central Bank is seen as the only institution with the firepower to calm tensions.
Its new head, Mario Draghi, is expected to play safe at his first policy meeting as ECB president on Thursday, seeking to project calm rather than being panicked into ramping up the bank's response to the escalating eurozone crisis.
A change in interest rates is unlikely at Thursday's meeting and markets will be watching for any clues on whether he stands ready to carry on, or even scale up, the ECB's bond-buying programme.