By Josie Cox 

The euro fell against the dollar early Tuesday, closing in on the 12-year low hit last month, while also chalking up a fresh near two-year low against Japan's yen.

In early trade, the single currency traded at $1.0559, down around 0.3% on the day. Since the start of the year, the euro has now declined close to 13% against the greenback--a symptom of an increasingly large rift between monetary policy in the U.S. and Europe.

While the U.S. Federal Reserve is inching closer to a rate rise, the European Central Bank has committed to a highly accommodative program of massive asset purchases until at least September next year.

Exacerbating the move is uncertainty surrounding Greece and its future in the currency bloc, Standard Bank currency strategist Steven Barrow wrote in a note Tuesday.

"Faith in the currency seems to be crumbling," he wrote.

Greece last week met the deadline for repaying part of its loan from the International Monetary Fund, but the country remains locked in negotiations with its creditors over its broader bailout program.

Among its near-term debt burdens, Greece must repay IMF loans of about EUR770 million on May 12. Maturing treasury bills in the next two months also create a challenge, as foreign investors are increasingly unwilling to buy new issuance and Greek banks have been ordered by the eurozone banking supervisory authority not to increase their exposure.

In stock markets Tuesday, merger and acquisition activity continued to drive sentiment.

Shares in French telecommunications equipment maker Alcatel-Lucent SA soared more than 14% in early trade on news that Finland's Nokia Oyj is in talks to buy the company.

The past few weeks have seen an upswing in merger and acquisition activity, supporting shares around the globe. Last week, Petroleum giant Royal Dutch Shell PLC said it is in advanced talks to acquire Britain's BG Group PLC in a deal that would likely be valued at upward of $50 billion.

FedEx Corp. meanwhile, agreed to buy Dutch package-delivery company TNT Express NV for $4.8 billion.

On Tuesday, the Stoxx Europe 600 index was around 0.1% lower in early trade, having edged up to new record high on Monday. Germany's DAC lost 0.3% in early trade, while France's CAC and London's FTSE both inched slightly less than 0.1% lower.

In commodity markets, Brent crude rose 0.7% to $59.43 per barrel. Gold was down 0.5% to $1,193.50 per troy ounce.

Write to Josie Cox at josie.cox@wsj.com

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