Euro falls as Greece deadlock remains

The euro fell on Monday after Greece failed to meet a self-imposed Sunday deadline for reaching an agreement with its lenders to unlock aid, keeping alive fears of a debt default and possibile exit from the euro zone. Athens and its euro zone and International Monetary Fund (IMF) creditors have been locked in talks for months, with the single currency often reacting to signs of deadlock or breakthrough. Greece faces a payment to the International Monetary Fund on Friday and the expiration of its bailout programme on June 30.
"It's pretty clear that Greece is coming to a head but also the dollar seems to be trading pretty well on the crosses," said Peter Kinsella, a currency strategist at Commerzbank in London, "(But) the bigger story for the euro in June and July is going to be continuing portfolio outflows." "You've got about 260 billion euros of euro bonds which are going to be redeemed in the coming six or seven weeks. It's quite likely that a significant portion of these bonds will not be rolled over... That should keep the euro under pressure."
The euro fell 0.7 percent against a broadly stronger dollar on Monday to trade at $1.0926, retreating from Friday's one-week high of $1.1006. Against the yen, the single currency slipped 0.7 percent to 135.46. Although strategists disagree on the extent to which Greece's protracted talks with its creditors have impacted on the single currency, most agree that as the country's IMF deadline draws closer, a potential default and "Grexit" is weighing more heavily on investors' minds.
"It's becoming increasingly unlikely that (Greece) will be able to get the funding without some kind of political disruption along the way," said Hamish Pepper, a currency strategist at Barclays bank in London. "The impact on the currency is also consistent with that view." With the euro on the backfoot, the dollar index gained 0.3 percent 97.358, close to last week's one-month high of 97.775. Investors have largely shrugged off data showing the US economy contracted in the first quarter, figures that were seen as backward looking and unlikely to derail the prospect of an interest rate hike later this year. Against the yen, the greenback was little changed at 124.15 , holding just under a 12-year peak of 124.46 scaled last week as investors bet on a diverging rate path between the United States and Japan, where policy remains ultra-loose.