The euro was trading around $0.99185, down 0.4 per cent on the day. It slid during Asian trading hours and hit $0.9876 in early European hours, its lowest since 2002 EUR=EBS.
Euro zone government bond yields rose, with Italian yields heading towards 4 per cent IT10YT=RR.
The European Central Bank (ECB) meets later this week and is expected to deliver its second big rate hike in an attempt to combat inflation, reports Reuters.
"Sky-high energy prices, the risk of gas shortages and the fiscal and regulatory response will shape the outlook for Eurozone GDP and inflation much more than anything the ECB may do with rates," said Berenberg chief economist Holger Schmieding in a client note.
Meanwhile in the UK, Liz Truss is expected to be named as Britain’s next prime minister later on Monday. She is poised to take power at a time when the country faces a cost of living crisis, industrial unrest and a recession.
The British pound was down around 0.4 per cent at $1.1476 GBP=D3, but flat against the euro at 86.405 pence EURGBP=D3.
Other PMI survey data on Monday showed that Germany's services sector contracted for a second month running in August, while Spain's services sector expanded at its slowest rate since January.