By Hiroyuki Kachi
The euro was only slightly lower against the dollar in Asia
trade Wednesday following Greece's default on an International
Monetary Fund loan, with investors choosing to avoid any major
moves ahead of Sunday's referendum on eurozone bailout
conditions.
With talks over a possible new deal apparently ruled out before
the vote, despite a request from Athens, U.S. data looks likely to
be the only main cue for currency markets ahead of the vote.
Around 0450 GMT, the dollar strengthened against the euro, with
the common currency falling to $1.1137 midday, compared with
$1.1153 overnight.
On Tuesday, Greece became the first advanced economy to default
on an IMF loan, after European finance chiefs rejected Athens's
last-minute request for emergency financial aid.
Market participants already made most of their moves into the
relative safety of the dollar and the yen earlier in the week in
anticipation of the default.
While investors will keep a close eye on the Greek situation,
market participants expect a string of U.S. data scheduled this
week, including ADP employment report today and monthly jobs data
Thursday, to be the main factor giving direction to the currency
market before the vote.
Kumiko Ishikawa, analyst at Gaitame.Com Research Institute, said
it was very unlikely Athens and its creditors would reach a
compromise anytime soon, citing comments by German Chancellor
Angela Merkel that there would be no new negotiations with Greece
until after Sunday's referendum.
"It is possible that dollar-led moves will give direction" to
the euro-dollar pair, she said, referring to the U.S. data.
The dollar was flat against the yen at Y122.53 from Y122.50 late
Tuesday in New York after falling as low as Y121.93. The euro was
unchanged at Y136.45 after sliding to a one-month low of Y133.80
earlier this week.
Currency market participants staged an exodus to the Japanese
currency as their preferred safe-harbor on mounting fears about
Greece's future in the eurozone at the beginning of the week.
"Investors now find it difficult to make moves" ahead of the
U.S. non-farm payroll data for June and the referendum, said Mizuho
Securities FX strategist Kenji Yoshii.
"If the jobs data fare well, the dollar will be bought on
expectations for a rate increase in September," said Mr. Yoshii.
But it's also "difficult to expect a continued upside challenge of
the dollar" when Greek fears still remain, he said.
He added that the dollar's upside will be capped, even assuming
that upbeat jobs data helps the dollar briefly cross the Y124
threshold. The Federal Reserve has said it wants to see a strong
improvement in wages before it raises interest rates.
The WSJ Dollar Index, a measure of the dollar against a basket
of major currencies, was up 0.01% at 86.16.
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31
USD/JPY Japan 122.52-53 122.49-50 +0.03 122.61 122.35 +2.34
EUR/USD Euro 1.1136-39 1.1139-42 -0.03 1.1150 1.1128 -7.94
GBP/USD U.K. 1.5699-701 1.5708-10 -0.06 1.5717 1.5681 +0.78
USD/CHF Switzerland 0.9357-61 0.9354-58 +0.03 0.9368 0.9342 -5.87
USD/CAD Canada 1.2499-504 1.2492-97 +0.06 1.2506 1.2476 +7.57
AUD/USD Australia 0.7715-19 0.7706-10 +0.12 0.7738 0.7675 -5.56
NZD/USD New Zealand 0.6798-804 0.6762-68 +0.53 0.6812 0.6765 -12.75
Euro Rate
EUR/JPY Japan 136.44-48 136.50-54 -0.04 136.56 136.17 -5.85
Source: ICAP PLC
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com