FOREX-Euro near 3-1/2-month low vs dlr as Greece churns
* Euro down 2.3 pct after falling in 8 of last 10 sessions
* News of JPMorgan trading loss hurts risky assets
* Greece political uncertainty weighs
* Options show bias for euro puts increasing (Updates prices, adds quotes)
By Julie Haviv
NEW YORK, May 11 (Reuters) - The euro was little changed against the dollar and hovered near a 3-1/2-month low in choppy trade on Friday as political uncertainty in Greece and hefty losses disclosed by U.S. bank JPMorgan Chase left investors on edge about taking on risk.
The euro has dropped against the dollar in eight of the past 10 sessions for a 2.3 percent decline in value as investors have focused on Greece, where inconclusive election results last Sunday threw the country into political disarray and raised the risk of it exiting the euro zone.
"The recent decline in the euro/dollar is clearly a direct response to the decline in global equity markets," said Gareth Sylvester, senior currency strategist at Klarity FX in San Francisco.
"These declines have been driven by the shifting political landscape in Europe, most notably in Greece and France, as well as the elevated Spanish banking concerns."
The euro last traded up 0.1 percent at $1.2942 after earlier hitting a trough of $1.2905, its lowest level since Jan. 23.
"We would suggest that the January lows at $1.2600 will provide achievable price targets," Sylvester said.
Traders said a reported euro option barrier at $1.2900 was the near-term focus on the downside, while offers at $1.2980 were likely to check near-term gains.
The euro had earlier climbed after Greek conservative leader Antonis Samaras said there were still hopes a government could be formed. But it later moved lower when the leader of the moderate Democratic Left said Greece was heading for a repeat poll.
The euro and growth-linked currencies were hit earlier in the session as investors shunned risky assets after JPMorgan Chase & Co said it suffered a trading loss of at least $2 billion from a failed hedging strategy.
Analysts said many market players were resigned to further political uncertainty in Greece, meaning the euro would probably grind lower against the dollar rather than drop suddenly.
Options market participants are betting on more euro weakness, with three-month risk reversals showing a firm bias for puts, trading -2.7 vols, flat from Thursday, but up from -2.325 vols a week earlier and -2.150 vols at the start of the month.
"The market does not feel there's any sense of urgency; investors have come round to the idea of the probability of another election," said Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi.
"But the net result is we are in a far worse position now than prior to the election. The probability of Greece not being in the single currency by the end of this year is considerably higher and that eliminates risks to the upside in euro/dollar for the next few months."
Mounting concerns about the Spanish banking sector and the government's ability to check its budget deficit also weighed on the euro and left investors fretting about whether the debt crisis will ensnare Spain, the euro zone's fourth-largest economy.
Data showing that U.S. consumer confidence hit a more than four-year high in early May boosted risk sentiment and buoyed the dollar against the yen, which last traded down 0.1 percent at 79.84.
Separate U.S. data showed producer prices unexpectedly fell in April, a sign of easing inflation pressures that could give the Federal Reserve more room to help the economy should growth weaken.
(Additional reporting by Nia Williams; Editing by Leslie Adler)
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