The Business Times

Euro skids as Greek debt talks break down

Published Mon, Feb 16, 2015 · 11:31 PM

[SYDNEY] The euro fell broadly early on Tuesday after a sudden collapse in talks to secure a new debt deal for Greece disappointed investors who had hoped there would be an outcome by now.

The common currency fell to US$1.1347, from Monday's high of US$1.1429 and back near the bottom of its prevailing US$1.1270-1.1534 range. Trading overnight was light with US markets shut for a public holiday.

The euro plumbed a one-week low of 134.00 yen before drifting up to 134.57. Against sterling, it came within a whisker of a 7-year trough of 73.69 pence set last week. It was last at 73.87 pence.

Talks between Greece and euro zone finance ministers over the country's debt broke down when Athens rejected a proposal to request a six-month extension of its international bailout as "unacceptable".

The unexpectedly rapid collapse of the talks unsettled markets although the consensus appears to still favour a last-minute deal for Greece, which faces the risk of running out of funds by the end of the month. "All up, still no deal. And something of a disappointment after what seemed to be the makings of a spirit of compromise last week," said David de Garis, senior economist at National Australia Bank.

Renewed weakness in the euro helped lift the dollar index to 94.201, from a one-week low of 93.899.

Against the yen, the dollar came close to retesting 118.00 , but managed to recover some ground to last stand at 118.47. It was still off Monday's high of 118.88.

Among commodity currencies, the New Zealand dollar was the best performer, reaching a three-week high of US$0.7529. In contrast, its Australian peer was flat at US$0.7775.

The focus this morning is likely to shift to the minutes of the Reserve Bank of Australia's Feb 3 policy meeting, when it surprised some by cutting the cash rate to a record low 2.25 per cent.

Still, there isn't much in the minutes that could surprise markets given that the central bank has since published a detailed report of its revised economic outlook. Also, the governor himself has explained the decision to lawmakers at a lengthy parliamentary testimony last week.


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