Euro sinks on dollar as confidence in Greece deal rises

[WASHINGTON] The euro sank about 1.5 per cent against the dollar on Tuesday as investors, gaining confidence in a Greek debt deal, sold the currency for assets with better returns, including the greenback.

The euro fell to US$1.1168 from US$1.1340 late Monday amid signs of a possible breakthrough in the five-month stalemate over getting new funding to the near-broke government in Athens.

Greece needs more loans from its official creditors before the end of June to avoid defaulting on a 1.5 billion euro (S$2.24 billion) payment to the International Monetary Fund.

But French Prime Minister Manuel Valls warned that there is still much work to be done to beat the deadline for a deal between Athens, the IMF and the European Union.

"The foundations of an agreement are there, but there is still a lot of work to do," Mr Valls said.

The euro's loss came despite surprised improvement in purchasing manager indices for France and Germany, which should have been bullish for the currency, said Kathleen Brooks of Forex.com.

However, she said the market focus is on whether the Federal Reserve will begin hiking interest rates in September. A strong jump in US new-home sales in May, reported Tuesday, was more evidence to support an early rate hike.

AFP