Euro falls before finance ministers meet as Greek deadline looms

The euro fell for a third day against the dollar before European finance ministers meet on Monday to discuss the financial aid that Greece needs to stave off a default.

The shared currency snapped its longest winning streak in a year as Greece faces a deadline on Tuesday to pay the International Monetary Fund. German Chancellor Angela Merkel is under pressure from within her own party bloc to give up on the debt-ridden country to preserve the euro. The Aussie slid before the government’s expected announcement of a wider budget deficit on Tuesday, while New Zealand’s dollar plunged as speculation heightened the country’s central bank will cut interest rates.

“The to-ing and fro-ing on Greece, given they’ve got that payment to the IMF due very soon,” is weighing on euro, said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney. Uncertainty over Greece’s future is set to continue as negotiations will probably be “kicking the can down the road for a while longer,” he said.

The euro slid 0.5 percent to $1.1149 at 6:46 a.m. in London, after touching $1.1133, the lowest since May 5. The shared currency had strengthened 5.1 percent in the past month. It fell 0.4 percent to 133.69 yen.

Euro shorts

The 19-nation currency is the worst performer among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes in the last three months, declining 2.8 percent.

“The risk may be swinging back to downside in the euro,” Greg Gibbs, a Singapore-based strategist at Royal Bank of Scotland Group Plc, wrote in a note on Monday. “Current levels are a decent place to establish a short position anticipating strength in the dollar and US rate hikes towards the second half of the year.”

Members of Merkel’s Christian Democratic bloc are openly challenging her stance of keeping Europe’s most-indebted country in the currency region. Even some officials in the Finance Ministry are leaning toward the conclusion that the euro area would be better off without Greece, two people familiar with the matter said.

An accord “will surely not be reached at the Eurogroup meeting on Monday,” Dutch Finance Minister Jeroen Dijsselbloem, the meeting’s chairman, told Italy’s Corriere della Sera newspaper. He said more time would be needed, according to the report.

Greece outlook

The euro-area economy probably grew 0.4 percent in the first quarter, according to a Bloomberg survey before data on May 13.

“It’ll be hard for the euro to gain much more after Dijsselbloem said an agreement will be difficult at the May 11 Eurogroup meeting,” Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., a margin-trading-services provider, wrote in a note to clients Monday. “Germany and the euro area will release first quarter GDP this week and if there’s growth, it’s possible the euro will continue to be bought back.”

The Australian currency declined 0.6 percent to 78.85 US cents, while the kiwi slid 1.5 percent to 73.79 US cents.

Australia’s Treasurer Joe Hockey is scheduled to deliver the annual budget on Tuesday. The government is likely to estimate a budget deficit of A$40 billion ($31.6 billion) for the 12 months ending June 30, 2016, about 2.4 percent of gross domestic product, according to a Bloomberg survey of analysts. That compares with an estimate of A$17 billion for the same fiscal year that Treasury published in May 2014.

The New Zealand dollar plummeted after Australia & New Zealand Banking Group Ltd. said the nation’s central bank is set to cut its key interest rate in both June and July.

“The OCR should be lower,” ANZ’s Wellington-based chief economist Cameron Bagrie wrote in a client note calling for consecutive cuts starting next month to New Zealand’s official cash rate. “The RBNZ may ultimately be proven right and the inflationary dragon is merely sleeping. If so the OCR can head back up. However, alternate scenarios are real. It’s looking more like Sleeping Beauty than a dozing dragon.” [Bloomberg]

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