Euro weakens with focus on Greek debt talks

London

THE euro hit a seven-year low against the pound on Wednesday before a eurozone finance ministers' meeting that will discuss Greece, with any failure to find common ground on the country's debt burden likely to see volatile trading.

The US dollar, meanwhile, hit a one-month high against the yen, bolstered by a rise in Treasury yields. Trade was thin, with Japanese markets closed for a public holiday.

Greek Finance Minister Yanis Varoufakis will present to the Eurogroup of eurozone finance ministers Greece's demands for an end to its international bailout and a transition to a new debt restructuring deal. At his first such meeting, he will seek a "bridge agreement" to buy time until June for a full settlement.

The euro moved higher on Tuesday on optimism that a compromise can be reached, which would be more acceptable to markets than Greece exiting the eurozone. Any suggestion of talks breaking down could see a sell-off in the euro.

Against the dollar, the euro fell 0.25 per cent to US$1.1295. It shed 0.4 per cent against the pound to hit 73.85 pence, its lowest in seven years.

"Greece is centre-stage and the Greeks are likely to present a plan that has met with resistance. So there is a downside risk for the euro and any rallies into US$1.1360 will be sold," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

The dollar rose 0.4 per cent to 119.95 yen, its highest level in a month. Helping the dollar was a rise in the benchmark US 10-year Treasury yield, which popped above 2 per cent on Tuesday for the first time in a month on views that the Fed might lift interest rates by mid-2015.

Meanwhile, most emerging Asian currencies slipped as US Treasury yields advanced on some Federal Reserve presidents' vocal support for interest rate hikes, while caution prevailed ahead of eurozone meetings on Greece's debt standoff.

The South Korean won underperformed on the yen's weakness and increasing caution over possible intervention by the foreign exchange authorities to stem the won's strength against the Japanese currency.

Malaysia's ringgit fell on lower bond prices and overnight slides in oil prices, while the Indonesian rupiah eased on local corporates' dollar demand. REUTERS