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The euro tumbled on Monday after Greece missed a self-imposed Sunday deadline for reaching an agreement with its lenders to unlock aid, keeping alive fears of a debt default and potential exit from the euro zone.
Athens and its euro zone and International Monetary Fund (IMF) creditors have been locked in talks for months, with the single currency reacting to any signs of deadlock or breakthrough.
Greece bailout
Without a deal, Athens risks default or bankruptcy in weeks. It faces a payment to the International Monetary Fund on Friday and the expiration of its bailout programme on June 30.
“It’s becoming increasingly unlikely that (Greece) will be able to get the funding without some kind of political disruption along the way,’’ said Hamish Pepper, a currency strategist at Barclays bank in London.
“The news over the week-end was consistent with that and the impact on the currency is also consistent with that view as well.’’
The euro fell 0.8 per cent against the dollar on Monday to trade at $1.0907, retreating from Friday’s one-week high of $1.1006. Against the yen, it slipped 0.7 per cent to 135.46.
With the euro on the backfoot, the dollar index gained 0.3 per cent 97.358, close to last week’s one-month high of 97.775.
Fed rate hike
Investors have largely shrugged off data showing the US economy contracted in the first quarter, figures that were seen as backward looking and unlikely to derail the prospect of an interest rate hike later this year.
Against the yen, the greenback was little changed at 124.15, holding just under a 12-year peak of 124.46 scaled last week as investors bet that on a diverging rate path between the United States and Japan, where policy remains ultra-loose.
“Dollar/yen is threatening to settle into a new range after breaking higher last week,’’ wrote Societe Generale strategists in a research note.
“There’s no driver of another leg higher in the first half of the week, though if US yields and equities start rallying together again, dollar/yen will likely follow.’’
Commodity currencies were also struggling against the US dollar, with the New Zealand dollar reaching a five-year low of $0.7072 in Asian trading and its Australian peer close to one-month lows around $0.76.
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