Euro slips as Greek deal remains elusive

The euro fell on Monday, hurt by uncertainty over whether a near-bankrupt Greece can secure more funding as its European partners demanded tough reforms in return for throwing a life-line to the debt-strapped nation.

The euro last traded at $1.1145, down 0.2 per cent on the day. Earlier on Monday, it had slid as far as $1.1090, having stood at $1.11625 in late US trade on Friday.

Against the yen, the euro fell 0.2 per cent to 136.65 yen, having retreated to as low as 135.40 yen earlier on Monday.

Greece was told to push legislation through parliament this week to convince its euro zone creditors to release funds to avert a state bankruptcy and start negotiations on a third bailout programme estimated at up to €86 billion.

A draft decision by Eurogroup finance ministers sent to the leaders showed that Greece must enact measures including tax and pension reforms by Wednesday night, and the entire package endorsed by parliament before talks on a bailout can start.

“Having thought that Sunday was the absolute, final deadline, we now have another absolute, final deadline on Wednesday,” said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.

The uncertainty has fostered a wait-and-see attitude in markets for now, Henderson said.

The emergency euro zone summit meeting in Brussels was set to reconvene in full session early on Monday, a spokesman for summit chairman Donald Tusk said.

Analysts expected the euro to bob around $1.10-$1.12 as investors waited to see whether Greek prime minister Alexis Tsipras would be able to pass the proposed austerity package amid opposition from his leftist coalition.

“I don’t think we are going to get a move of more than 2 per cent (in euro/dollar),” said Adam Myers, senior FX strategist at Credit Agricole in London. “However, if there are signs that Greece is going to go out (of the euro zone), then we could have a bigger move.”

As the safe haven yen edged higher, the dollar eased 0.1 per cent to 122.66 yen.

Uncertainty about Greece’s future in the euro zone will continue to dominate market sentiment for now, traders said, pushing aside the other big elephant in the room - an eventual US interest rate hike.

Last Friday, Federal Reserve chair Janet Yellen said she expected the Fed to raise interest rates at some point this year.

Boston Fed president Eric Rosengren, one of the Fed’s most dovish officials, said September may be the right time to hike rates if the US economy continued to improve.

Investors will also be keeping a wary eye on Chinese stocks, which had bounced sharply for a second day on Friday in a sign that Beijing may finally have stabilised the market after rolling out a raft of supportive measures.

Shanghai shares were up 2.1 per cent on Monday morning, after having climbed 4.5 per cent on Friday.

Reuters