SYDNEY (Reuters) - The euro took a spill early on Thursday after the European Central Bank said it will no longer accept Greek bonds as collateral for its liquidity operations, dealing a blow to Athens which is seeking debt relief from euro zone lenders.
The common currency last traded at US$1.1331, having fallen as far as US$1.1315. It has completely reversed a short-covering rally that lifted it to US$1.1534 on Tuesday.
It shed a full cent after the ECB surprised markets late on Wednesday by announcing it would reimpose minimum credit rating requirements for Greek bonds, effectively shifting the burden on to the Greek central bank to finance its lenders.
The decision came after Greece's new finance minister Yanis Varoufakis emerged from a meeting with ECB President Mario Draghi to claim that the ECB would do "whatever it takes" to support member states such as Greece.
"This is a precautionary move by the ECB, but it is important," said CitiFX strategist Richard Cochinos.
Cochinos said the shift in the ECB's program will be seen by markets as indicating that the meeting between Varoufakis and Draghi did not go well.
Against the yen, the euro fell as far as 132.55, retreating from a two-week peak of 135.35. It also lost ground against the Australian and New Zealand currencies.
Worries about Greece and renewed weakness in oil prices overshadowed China's latest efforts to reinvigorate its economy.
Beijing late on Wednesday made a system-wide cut to bank reserve requirements for the first time in over two years in a move that should release a fresh flood of liquidity.
The US dollar also slipped against the yen, although it remained well within a 116.00-119.00 range seen in the past few weeks. It fetched 117.24, down from Wednesday's high of 118.00.
The Australian dollar dipped to 90.92 yen from 92.35 and slid back below 78 U.S. cents.
Retail sales data due at 0030 GMT will be the next test for the Aussie, with any disappointment likely to put pressure on the currency.