Euro hovers above 22-month low in Asia

The euro hovered just above its 22-month low against the dollar on Thursday and remained vulnerable to further declines as the prospect of a Greek exit from the eurozone kept investors on tenterhooks. The euro eased 0.1 percent to $1.2574. It fell to about $1.2545 the previous day, its lowest level since July 2010. That level should provide initial support, followed by $1.2500.
The euro drew little comfort from an informal summit of European Union leaders that shed no new light on how the eurozone nations intend to tackle its debt crisis, including the threat of Greece's exit from euro. "It's still hard to see what the endgame will be like," a trader at a Japanese bank in Tokyo said. European Union leaders urged Greece to stay the course on austerity and complete the reforms demanded under its bailout programme.
Three officials told Reuters that members of the currency bloc have been warned to prepare contingency plans in case Greece quits the euro, an eventuality that the German central bank said would be testing, but "manageable." "With a Greek exit once again being discussed, the pressure on the euro should continue especially with the lack of clarity on any of the pressing issues," analysts at BNP Paribas wrote in a client note. The next major support level for the euro is seen at $1.2500, although some market players say the single currency is at risk of an even steeper drop.
Daisuke Karakama, market economist at Mizuho Corporate Bank in Tokyo, said the euro may drop to $1.20 by the end of June. The $1.20 level is key for the euro because the $1.20 to $1.22 range is seen as being roughly consistent with purchasing power parity, Karakama said.
With the euro under pressure, the safe-haven dollar held its ground. Against a basket of major currencies, the dollar stood at 82.086. That was close to a peak of 82.221 hit on Wednesday, the dollar's highest level since September 2010. The dollar held steady against the yen at 79.50 yen. The Australian dollar inched up 0.1 percent to $0.9759, staying above a six-month low of $0.9690 hit on Wednesday.