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By Bloomberg

The euro dropped to a one-week low against the dollar as Greeks voted against yielding to further austerity, raising the risk of an exit from the currency union that would call into question the bloc’s integrity.

Sixty-one percent of Greek voters backed Prime Minister Alexis Tsipras’s rejection of further spending cuts and tax increases in a referendum, data on the Interior Ministry website show. Turnout was 62.5 percent. The yen strengthened against all its 16 major counterparts as the Greek crisis spurred demand for haven assets. Australia’s dollar fell below 75 U.S. cents.

“A ‘no’ vote in the Greek referendum isn’t good news, so the initial reaction to sell the euro is the right one,” said Yuji Saito, executive director of foreign exchange at Credit Agricole SA in Tokyo. “Right now it’s risk off, and the dollar and yen are in demand. There will probably be a return to bailout negotiations, but the chance of reaching an agreement seems slim.”

The euro slid 0.5 percent to $1.1055 at 6:46 a.m. in London after declining as much as 1.3 percent to $1.0970, the lowest level since June 29. The shared currency tumbled 0.8 percent to 135.31 yen. The yen gained 0.3 percent to 122.38 per dollar.

While Greece accounts for less than 2 percent of the euro zone’s output, an exit would set a precedent for other nations that membership is reversible. The currency has been resilient amid the ebb and flow of Greek bailout talks, gaining 3.9 percent versus the dollar in the three months through June 30, its best quarter since 2013.

The euro pared some of its losses after Finance Minister Yanis Varoufakis said he was leaving the ministry.

Merkel, Hollande

German Chancellor Angela Merkel will travel to Paris on Monday to meet French President Francois Hollande. The two leaders agreed in a telephone call that the decision of the Greek people in the referendum was “to be respected,” the German government press office said in an e-mail.

“The risks the Greek referendum pose to the very heart of the European Monetary Union have yet to be fully understood,” said Robert Rennie, global head of currency and commodity strategy at Westpac Banking Corp. in Sydney. “Financial markets will be watching very closely for reactions from Hollande, Merkel,” and European Central Bank President Mario Draghi, he said.

The euro may weaken toward its 12-year low of $1.0458 set on March 16, Rennie said.

Volatility Rises

One-month implied volatility, a measure of anticipated price swings in the euro-dollar exchange rate, rose to 13.4 percent, from 12.7 percent at the end of last week.

“Markets are just wrecked with uncertainty,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “Until we see what the inclination, particularly for the German side, is when they meet tomorrow, that’s just making people hesitant to jump in with both feet and sell the euro.”

The 19-nation shared currency has weakened 8.6 percent against the dollar this year, after a 12 percent decline in 2014, fueled by a divergence in monetary policy between the U.S. and the euro area. Before the Greek referendum was announced, analysts saw it weakening to $1.05 by year-end, according to forecasts compiled by Bloomberg.

‘Ultimate Fate’

The euro’s losses may be limited as new negotiations will keep the hopes of a deal between Greece and its creditors alive, according to Valentin Marinov, head of Group-of-10 currency research at Credit Agricole SA’s corporate and investment- banking unit in London.

“It may take months before we know the ultimate fate of Greece,” Marinov wrote in an e-mailed note. “Indications on Monday that Athens and its creditors will be returning to the negotiations table fairly soon could help contain the losses of risk-correlated currencies and, to an extent, the euro.”

The Greek turmoil has already shown up in currency pairs other than the euro against the dollar. Swiss National Bank President Thomas Jordan said on June 29 the central bank intervened in markets as demand for francs soared after Greece announced plans to hold the referendum. Sweden’s central bank cut its main interest rate and expanded bond purchases as the turmoil in Greece raised the specter of further krona gains.

The franc appreciated 0.2 percent on Monday to trade at 1.0424 per euro.

Australia’s dollar dropped below 75 U.S. cents amid concern a seven-day selloff in iron ore and the steepest plunge in Chinese stocks since 1992 will hurt the South Pacific nation’s economy.

“The Aussie is heading down toward 72 to 73 cents, the only question is how quickly it gets there,” West[ac’s Rennie said. “The impact of the Greek referendum on risk assets has given it an extra push.”

The Aussie slipped 0.5 percent to 74.85 cents after declining to 74.52 cents, the weakest level since May 2009.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major peers, gained 0.2 percent to 1,189.62. It has climbed 5.2 percent this year.