NEW YORK (Reuters) – The euro tumbled to a 14-month low against the dollar on Thursday after the European Central Bank failed to offer new measures to ease a Greek debt crisis, which investors fear could spread across Europe.

After dropping to $1.2655, the euro was down 0.7 percent at $1.2715 EUR=, hovering around its lowest since March 2009.

Confidence in the euro zone has been plummeting as Greece struggles to introduce cuts to public spending in the face of violent protests in Athens.

“Nothing short of a sensational announcement can help the euro at this point. And that certainly did not come from (ECB President Jean-Claude) Trichet,” said Kathy Lien, a director for currency research at GFT Forex, in New York.

As expected, the ECB left interest rates at a record low of 1 percent on Thursday. Trichet said the bank had not considered buying government debt to stop the euro’s rout, as some had speculated, and a Greek default was “out of the question.”

Germany’s parliament was due to vote on approving its share of a 110-billion-euro EU/IMF Greek rescue package on Friday, but fears of contagion to other heavily indebted euro zone countries, including Spain and Portugal, persisted, driving a safe-haven bid for the dollar and U.S. Treasury debt.

The euro is down 4.8 percent against the dollar so far this week and is off more than 11 percent year to date.

Among major currencies, the dollar was only weaker against the yen, dropping 1.5 percent to 92.45 yen JPY=. The Japanese currency also tends to benefit in times of risk aversion.

The euro hit a 15-month low of 116.59 yen and was on track for its biggest daily decline against the Japanese currency since February. It was last down 2.2 percent at 117.65 yen EURJPY=.

The euro also hit an all-time low against the Swiss franc beneath 1.41 francs EURCHF=, shedding 1.6 percent. Traders said the Swiss National Bank, which has been intervening in the market in recent months to prevent excessive franc strength, earlier stopped defending levels above $1.43.

Sterling fell 1.2 percent to $1.4915 GBP=D4 as markets awaited the outcome of a closely-contested parliamentary election.

CONTAGION FEARS

As Greece struggles to consolidate its budget, fears have grown over the effect of the crisis on the more vulnerable members of the euro zone.

“Many expect that Portugal and maybe Spain will follow in Greece’s footsteps and need a bailout from the European Union,” said John Doyle, foreign exchange strategist at Tempus Consulting in Washington.

Investors were hoping for reassurance from the ECB but analysts said the bank’s latest comments indicated it was more concerned with recent improvements in the euro zone economy.

The euro earlier trimmed some losses after Spain managed to sell five-year government debt, albeit at a higher yield than at its last sale in March, which quelled some market concerns that Madrid’s credit risks may be rising quickly.

“The auction results suggested a feeling that the contagion, at least for Spain, may not be that strong,” said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt. (Additional reporting by Wanfeng Zhou and Vivianne Rodrigues in New York and Naomi Tajitsu in London; Editing by James Dalgleish)

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