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Euro on defensive as Greece misses IMF debt deadline

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The euro got off to a cautious start in Asia on Wednesday with Greece's fate still hanging in the balance after it became the first advanced economy to ever be in arrears to the International Monetary Fund.

[SYDNEY] The euro got off to a cautious start in Asia on Wednesday with Greece's fate still hanging in the balance after it became the first advanced economy to ever be in arrears to the International Monetary Fund.

The common currency eased 0.2 per cent to US$1.1128, having suffered a 0.8 per cent drop on Tuesday. It has been choppy between US$1.0955 and US$1.1279 this week in reaction to ever-changing developments in Greece.

Against the yen, the euro slipped 0.1 per cent to 136.25 , having fallen nearly 1 per cent on Tuesday.

The International Monetary Fund on Tuesday confirmed Greece had not made its 1.5 billion euro loan repayment. IMF spokesman Gerry Rice said Greece had asked for a last-minute repayment extension, which the Fund's board will consider "in due course." With its missed payment to the IMF, Greece is on a path out of the euro with unforeseeable consequences for both the EU's grand currency project and the global economy.

Yet, there was no major reaction in markets. "There is so much uncertainty, speculation, truth and partial truth that many markets are in stasis; waiting to see which way this goes," said Emma Lawson, senior currency strategist at National Australia Bank.

German Chancellor Angela Merkel has ruled out further negotiations with Athens until after Sunday's referendum, when Greek voters decide on whether to stay in the euro zone or return to the drachma.

Opinion polls show a majority of Greeks favour holding on to the euro, but the referendum is shaping up to be a close call.

With the euro on the backfoot, the dollar index drifted up to 95.529 from Tuesday's low of 94.847. Versus the yen, the dollar stood at 122.42, near a five-week low of 121.93 plumbed overnight.

Greece is likely to continue hogging the headlines, relegating surveys on manufacturing activities to the background.

REUTERS

 

Read more on the Greek crisis here.