The euro fell heavily across the board on Monday after Greek and French elections cast doubt on politicians' commitment to austerity plans aimed at tackling the euro zone debt crisis.

Traders said losses, which saw the common currency hit a three-month low against the dollar, its lowest in 3-1/2 years against the British pound and a 2-1/2 month trough versus the yen, were likely to be extended in coming days.

In Greece the failure of the two main parties supporting the country's international bailout to secure a parliamentary majority threw into question the future of the programme and potentially Greece's membership of the euro.

In France Socialist Francois Hollande, who has championed a longer time-frame for eliminating the deficit, ousted centre-right incumbent Nicolas Sarkozy in a result that could start a push-back against German-led austerity across the euro zone.

The euro sank to a session low of $1.29552 on trading platform EBS, breaking out of the $1.30 to $1.35 range it has been trapped in since late January. Traders cited selling by fund managers although trade was expected to be muted during the European day due to a UK public holiday.

'The reaction in the foreign exchange market shows if it really comes to the point where it's clear European politicians will step back from austerity measures that will be perceived as very negative by financial markets,' said Lutz Karpowitz, currency analyst at Commerzbank.

'In Greece it's maybe the worst outcome we could have had there. It looks impossible to find a government that will be in favour of austerity.'     

Some strategists said the break below the euro's recent tight range meant it could fall towards the 2012 low around $1.2623. Nomura forecast the euro would fall in the near term to a range between $1.26 to $1.28 before consolidating.

For now, the euro has support at $1.2950, a major option barrier and the 61.3 percent retracement of its rally from its January low to a high in February, although uncertainty over Greece could overwhelm this.

With the majority of votes counted, the conservative New Democracy (ND) and socialist PASOK parties, which were the only parties supporting a bailout programme, were seen falling short of the 151-seat threshold needed for even the most fragile majority in parliament.      

'Until we have more clarity on how the coalition government will be formed and what the new government will do with the bailout scheme, the euro will stay under pressure,' said Masafumi Yamamoto, chief FX strategist at Barclays.

While Hollande's victory had been widely anticipated, some market players worried that his focus on growth measures to temper austerity could lead Paris to clash with Germany's insistence on tough deficit reductions.

The euro fell to 80.37 pence against the British pound, a level last seen in November 2008 in the aftermath of the collapse of Lehman Brothers. The common currency hit 103.23 yen on trading platform EBS, its lowest since mid-February.

Disappointing US jobs data on Friday added to investors' aversion to riskier currencies, and prompted traders to cut exposure to the growth-correlated Australian dollar.

The Aussie fell to a new 2012 low of $1.0110, although solid Australian retail sales data helped it recoup some losses to last stand at US1.0170, close to flat on the day.

The US dollar was steady at 79.82 yen, having fallen back below 80 yen, seen as a support, on Friday after the US jobs numbers.      However, the dollar had support around atwo-month low of 79.64 yen hit last week and 79.14 yen, a 61.8 percent retracement of its rally from February to March.     

Uncertainty over the euro zone helped the dollar index  to a three-week high of 80.176. - Reuters