The euro fell sharply after staging a mini rally on Monday despite Greece reaching a deal over its third bailout, as investors turn their attention to the timing of a U.S. interest rate hike.
The volatility, which sent the single currency hitting $1.1196 against the dollar before dropping more than 1 percent to hit hit lows of around $1.10400. The euro was also down over 1 percent against sterling at £0.7106.
Analysts said that the brief pop and drop seen by the euro can be explained by the safe haven status that the currency took on during the Greek crisis. It has remained fairly stable as negotiations between the debt-stricken nation and its creditors dragged on.
"For the last 12 months, the euro has been a funding currency of choice, as the ECB has pledged low interest rates for the long-term and embarked on QE (quantitative easing)," Kathleen Brooks, U.K. and EMEA research director at FOREX.com, said in a note.
"Now that the uncertainty around Greece has been, hopefully, eradicated, the market may choose to return to higher risk FX strategies like the carry trade, which could put further downward pressure on the single currency."