Euro slips in Asia

The euro slipped in Asia on Wednesday with Greece's fate still hanging in the balance after it became the first advanced economy to ever be in arrears to the International Monetary Fund. The common currency eased 0.2 percent to $1.1128, having suffered a 0.8 percent drop on Tuesday. It has been choppy between $1.0955 and $1.1279 this week in reaction to ever-changing developments in Greece.
Against the yen, the euro stood almost flat at 136.38, after having fallen nearly 1 percent on Tuesday. The International Monetary Fund on Tuesday confirmed Greece had not made its 1.5 billion euro loan repayment. IMF spokesman Gerry Rice said Greece had asked for a last-minute repayment extension, which the Fund's board will consider "in due course." With its missed payment to the IMF, Greece is on a path out of the euro with unforeseeable consequences for both the EU's grand currency project and the global economy.
Still, investors are sticking to hopes that Greek voters will accept the bailout terms proposed by the international creditors in a referendum on Sunday and that Greece will strike a bailout deal in the end. "The market seems to think the worst can be avoided and that Greece will accept the bailout after the referendum," said Takako Masai, head of market research at Shinsei Bank in Tokyo.
"If we see more opinion polls on the referendum in coming days, they will surely move the market," she added. Opinion polls conducted earlier have shown a majority of Greeks favour holding on to the euro, but the referendum is shaping up to be a close call. "There is so much uncertainty, speculation, truth and partial truth that many markets are in stasis; waiting to see which way this goes," said Emma Lawson, senior currency strategist at National Australia Bank in Sydney. German Chancellor Angela Merkel has ruled out further negotiations with Athens until after Sunday's referendum.
With the euro on the backfoot, the dollar index drifted up to 95.588 from Tuesday's low of 94.847. Versus the yen, the dollar stood at 122.51, near a five-week low of 121.93 plumbed overnight. The yen showed muted response to an upbeat reading on the Bank of Japan's tankan corporate sentiment survey.
Japanese business sentiment improved to levels not seen since before the economy slipped into recession last year, the survey showed big companies plan to increase capital expenditure at the fastest pace in a decade. The Australian dollar was underpinned after surveys showing China's factory sector expanded slightly in June and that growth in its services sector picked up. The Australian dollar stood at $0.7720, up slightly on the day.