Euro falls below $1.31 for first time since January

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The euro fell on Tuesday below $1.31 for the first time since January amid unrelenting concern about the eurozone debt crisis.

At 1605 GMT the euro was trading at $1.3057, its lowest level since January 12, and then stabilised around $1.3075.

Kathleen Brooks at Forex.com said that the slide may have due to German Chancellor Merkel's rejection of calls to raise the upper limit of the European Stability Mechanism rescue fund, which currently stands at 500 billion euros.

Some countries want to increase the level of the eurozone's permanent bailout fund that is now due to come into operation in mid-2012 as 500 billion euros would be insufficient to handle a potential rescue of Italy and Spain.

Michael Hewson at CMC markets said Merkel's comments renewed concerns that European leaders failed to fully agree on how to resolve the debt crisis despite agreeing in principle to adopt much stronger budgetary coordination.

"The single currency continues to find any sort of progress difficult to sustain and the comments out of Germany from Merkel about the ESM suggest that EU policymakers are as far away as ever to a communal and uniform approach to the debt crisis," Hewson said.