Euro slips on Greek Woes, rate cut speculation hits kiwi

The euro slipped against the dollar as nerves took hold before key talks between Greece and euro zone finance ministers, while the New Zealand dollar sank to a near two-month trough as speculation over when the country’s central bank could cut rates gathered momentum.

The euro fell 0.6 percent to $1.1137 EUR=, pulling back from a two-month peak of $1.1392 struck Thursday when the outlook for the European economy thawed and euro zone bond yields spiked, grabbing attention away from Greek debt saga. The rise in euro zone yields petered out late last week, taking some support away from the common currency.

“Greek-related headlines have begun filtering out over the weekend, and the debt negotiations will be one of this week’s currency themes. Today’s Eurogroup meeting and its impact on the euro will be in focus,” said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

The Eurogroup of euro zone finance ministers has ruled out clinching a deal to unlock aid for Greece at Monday’s meeting, although Athens remains hopeful that the meeting will note progress in talks with lenders. Greece risks defaulting on its debt if it does not receive fresh funding.

“It is difficult to put a finger on the exact flows, but it appears that large lot selling went through ahead of the Greek debt talks,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

“The Eurogroup meeting is not the deciding event. According to the market’s view, it is not until July or August that Greece’s cash flow becomes very serious. But the current liquidity problems Greece already faces do not make the euro an attractive currency,” he said.

The dollar stood little changed against the yen after Friday’s mixed U.S. jobs data failed to offer much of a buying incentive.

The greenback was steady at 119.93 yen JPY=, having slipped from an overnight high of 120.24 after the release of Friday’s U.S. jobs numbers.

The closely-watched U.S. jobs data showed April non-farm payrolls increase roughly in line with forecasts to 223,000 but a significant downward revision to the March figure. Wage growth, a favored metric for Fed policy makers, was also softer than expected.

The mixed data supported bets that the Fed will not begin hiking rates until late in 2015 and pushed U.S. debt yields lower, in turn weakening demand for the dollar.

“And with the U.K. elections over, attention will shift back towards fundamentals and Bank of England policy and whether it can head towards hiking rates,” Kadota at Barclays said.

Investors will have a chance to gauge the central bank’s stance when the BOE policy meeting minutes are released later in the day.

The pound dipped slightly to $1.5408 GBP=D4 after surging well over 1 percent to a two-month high of $1.5523 late on Friday, after Prime Minister David Cameron’s Conservative Party defied expectations and won, a relief for investors who were braced for a hung parliament and the political uncertainty associated with it.

The New Zealand dollar remained under pressure after the country’s central bank hinted last month that it might cut rates if the economy slowed and inflation stayed low, stirring market speculation regarding the timing of its easing. The kiwi was down 1.4 percent, touching a near two-month low of $0.7373 NZD=D4.

Tim Kelleher, head of institutional FX sales at ASB Bank said a prediction from ANZ bank that the Reserve Bank of New Zealand (RBNZ) would cut rates in both June and July cranked up selling pressure on the kiwi.

Source: Reuters