1. Euro edges lower ahead of euro zone summit on Greece

Euro edges lower ahead of euro zone summit on Greece

After Greek voters overwhelmingly rejected austerity at a weekend referendum, France and Germany urged Athens on Monday to muster further proposals and restart talks with its lenders.

By: | Tokyo | Published: July 7, 2015 12:25 PM
greece crisis

After Greek voters overwhelmingly rejected austerity at a weekend referendum, France and Germany urged Athens on Monday to muster further proposals and restart talks with its lenders. (Reuters)

The euro slipped in Asian trading on Tuesday, but remained well off lows touched in the previous session ahead of a euro zone summit that investors hope might offer a way for Greece to climb out of its debt crisis and stay in the common currency.

“Maybe the market is pricing in some kind of possible agreement, though no one is eager to buy the euro,” said Masashi Murata, currency strategist at Brown Brothers Harriman & Co in Tokyo.

Investors were also awaiting monthly U.S. trade data later on Tuesday, he said. Economists have said that the stronger greenback is pressuring exports.

“People would like to see what is going on with the U.S. trade deficit, which also can give some clues to the second-quarter growth rate in the U.S.,” Murata said.

After Greek voters overwhelmingly rejected austerity at a weekend referendum, France and Germany urged Athens on Monday to muster further proposals and restart talks with its lenders. The country’s banks have already been closed for over a week, and only emergency funding can avert their insolvency.

Germany’s EU commissioner told German newspaper Bild that the Greek government would probably have to start issuing IOUs to pay wages and pensions and settle outstanding accounts, and that would render Greece unsuitable to remain in the currency union.

The euro was down about 0.2 percent on the day against the yen at 135.28, but still far above a six-week low of 133.700 yen plumbed on Monday.

Against the dollar, the euro edged down about 0.2 percent to $1.1034, but remained well above its low of $1.0969 touched on Monday, when it remained above its one-month trough of $1.0955 set in late June.

Despite the common currency’s relative resilience in the face of the Greek crisis, the country’s murky future in the euro zone and its deep fiscal woes cloud the currency’s long-term prospects.

“The ongoing uncertainty will be negative for the euro and risk appetite,” Kathy Lien, managing director of FX strategy for BK Asset Management, wrote in a note to clients.

“Therefore we like selling euros on the 1.11 handle. Anywhere below that provides poor risk reward,” she said.

The dollar inched slightly higher to 122.60, nearly a full yen above its six-week low of 121.700 yen hit on Monday as the Greek turmoil heightened the Japanese currency’s safe-haven appeal.

“I understand why the Greek people are venting their frustration. Fiscal consolidation is not making progress. They are in deflation. The world expects Greece and the EU to cooperate on a final bail out plan,” Japanese Economics Minister Akira Amari said on Tuesday.

The Swiss franc, another perennial safe-haven currency, was nearly flat on the day against the euro, which was buying 1.0411 francs.

The Swiss National Bank, which confirmed last week it had been intervening to weaken the franc, declined to comment on market speculation on Monday that it was continuing to intervene.

The Australian dollar slipped about 0.3 percent on the day to $0.7471, after the Reserve Bank of Australia kept its cash rate steady as widely expected. The Aussie remained above a six-year low of $0.7452 hit on Monday.

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