London - The euro weakened versus most of its major counterparts as Greece told its international creditors they needed to reduce their demands that have been holding up the release of bailout funds for the Mediterranean country.
The common currency fell to its lowest level against the pound in two-and-a-half months, as Greek Interior Minister Nikos Voutsis, who has no economic decision-making powers, went so far as to say on Sunday that Greece couldn’t pay the International Monetary Fund in June without a deal. The dollar rose on Monday even after completing its biggest weekly gain since September 2011. Federal Reserve Chair Janet Yellen said on May 22 that it would be “appropriate” to raise interest rates this year for the first time since 2006.
“There is ongoing euro negativity in the light of the Greek comments about the June 5 payment, while markets consider the dollar in the light of the Yellen warnings on rates on Friday,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “It should be relatively quiet in view of the lack of data and market liquidity.”
The euro fell 0.4 percent to $1.0967 at 9:36 a.m. London time after dropping 0.9 percent on May 22. The common currency fell 0.4 percent to 70.82 pence and touched 70.73 pence, its lowest since March 12. It weakened 0.3 percent to 133.40 yen. The dollar was little changed at 121.63 yen.
Financial markets in the US, UK, Hong Kong and much of Europe are closed Monday for holidays.
Varoufakis’s view
The euro is coming under pressure after German Chancellor Angela Merkel and French President Francois Hollande last week gave Greece until the end of May to reach an agreement on its aid programme, including economic-policy changes demanded by creditors. Greek Finance Minister Yanis Varoufakis said on Sunday his government has met the euro area and IMF three-quarters of the way, so it was up to creditors to cover the remainder.
The Mediterranean nation is scheduled to repay about 300 million euros to the IMF on June 5. Before that the government has to pay monthly salaries and pensions.
The euro has declined 2.6 percent in the past three months against a basket of peers tracked by Bloomberg Correlation Weighted Indexes, the worst performance of the group.
US data last week signaled the economy is starting to recover from a tepid first quarter as core consumer prices rose at a faster pace than economists expected. The speed of normalisation in interest rates is likely to be gradual once increases start, Yellen said May 22 during a speech in Providence, Rhode Island.
In the US this week, investors will be scanning US durable goods, housing and consumer confidence reports.
“Investors look exceedingly keen to jump back on the strong dollar story upon any evidence the Fed remains on track for a September liftoff in rates,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., wrote in an email to clients. “As rather unrepentant dollar bulls, we are comforted by the Fed chair’s messages.”
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major trading partners, rose 0.1 percent to 1181.48, after jumping 2.6 percent last week.
* With assistance from Kevin Buckland in Tokyo and Netty Ismail in Singapore
Bloomberg