Euro drops to lowest level this year The euro hit its lowest level this year as investors" hopes that an EU summit on Wednesday would deliver stability to the eurozone faded. The single currency hit $1.2613, its weakest level since August 2010. Sentiment on the eurozone received a blow following comments made on Tuesday to Dow Jones by Lucas Papademos, former Greek prime minister, who said that Greece was taking preparations to leave the eurozone. Mr Papademos later said he was not aware that any European country, including Greece, was making preparations to leave the euro, but said that the possibility could not be excluded. "The drop lower in the euro this morning highlights the vulnerability of the currency," Jane Foley, senior currency strategist at Rabobank, said. The fact that the currency did not recover despite Mr Papademos clarifying his remarks on a Greek exit is also evidence of the downside risks on the euro right now. Some investment banks were recommending clients take profits on short euro positions. BNP Paribas said it had closed its short euro position at $1.2625. Citigroup said it believed the euro was now undervalued against the dollar. "We suspect that headlines from the summit ... could be mildly supportive for the single currency," analysts said in a note. The next big move lower in the euro-dollar could come if the Greek crisis evolves into a bout of global risk aversion. The pound fell further against the dollar as minutes from the last meeting of the Bank of England's Monetary Policy Committee suggested a dovish tendency among some members. "For several members, the decision not to expand the asset purchase programme at this meeting was finely balanced," the minutes stated, fuelling speculation that the UK might still embark on another round of monetary easing, weakening the pound. Sterling fell 0.3 per cent to $1.5677, its weakest level in more than two months. It was slightly stronger against the euro, rising 0.1 per cent to €1.2434. The yen reversed the previous day's losses, strengthening against major currencies after Fitch Ratings downgraded Japan's credit rating on Tuesday and the Bank of Japan's announcement that it would not be increasing its programme of asset purchases. The yen has been strengthening in recent weeks because of haven demand as the eurozone crisis has worsened. The dollar fell 0.8 per cent to Y79.37 while the pound fell 1 per cent to Y124.83. The euro fell 0.9 per cent to Y100.13, its weakest level since February.