Euro slips as Greek default looms

File photo: Lee Jae-Won

File photo: Lee Jae-Won

Published Jun 30, 2015

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Tokyo - The euro slipped back in Asian trade on Tuesday as investors mulled growing chances of a Greek default and its potential fallout.

The common currency eased to $1.1195 in Tokyo trade from $1.1247 in New York late on Monday.

The 19-nation currency had rallied from an almost one-month low on Monday on news reports that German Finance Minister Wolfgang Schaeuble said he did not view Greece as a contagion risk for the rest of the eurozone.

“Right now the biggest surprise is that the euro is not materially weaker,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual.

“Market expectations are that the Greek situation is manageable even if they exit the union,” he said in a client note.

Greek Prime Minister Alexis Tsipras stunned the world at the weekend by calling for a referendum on austerity conditions demanded by its creditors in exchange for bailout funds.

The move increased the possibility of a Greek default and eurozone departure.

On Monday, Tsipras implied that Athens would default on a 1.5 billion-euro debt payment due on Tuesday to the International Monetary Fund, a partner in the bailout with the European Commission and the European Central Bank.

“(How) is it possible the creditors are waiting for the IMF payment while our banks are being suffocated?” he asked in a television interview.

“Once they decide to stop the suffocation, they will be paid,” he added.

Against the Japanese unit considered a safe haven in time of financial turmoil, the euro fell to 137.12 yen on Tuesday from 137.82 yen in Monday US trade.

The dollar inched down to 122.47 yen from 122.55 yen.

A Capital Economics analysis said the Greek government's referendum plan “has elevated the crisis to a higher level”.

“While the latest opinion polls point to a 'yes' vote, we suspect that Greek people may ultimately vote 'no' when faced with the pension cuts etc. that this requires,” it said.

“And they may not even get that far if the expiry of the bailout and failure to repay the IMF today result in the ECB cutting off emergency liquidity assistance for Greek banks.

“Either way, we think that the risk of a near-term Grexit has probably risen above 50 percent,” it said.

* Bloomberg News contributed to this article

AFP

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