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Greece, which must repay a 750 million euro loan
to the International Monetary Fund on Tuesday, faces the risk of
defaulting on debt repayments and being forced out of the euro
zone. Negotiations have moved slowly and its lenders have ruled
out a decisive agreement at Monday's meeting of euro zone
finance ministers.
The euro fell half a percent to $1.1153 <EUR=>, well below the
two-month peak of $1.1392 struck on Thursday when the outlook
for the European economy thawed and euro zone bond yields
rallied. Against sterling, it shed 0.7 percent to a ten-day low
of 72.010 pence <EURGBP=D4>.
"The market is certainly pricing in a higher risk of default,
but that doesn't necessarily mean (Greece will) also leave the
euro zone," said Lee Hardman, a currency economist at Bank of
Toyko-Mitsubishi UFJ in London.
"I think the more likely scenario is still that Greece will
compromise and a last-minute agreement will be reached."
French Finance Minister Michel Sapin said on Monday that
Monday's Eurogroup meeting would be "important but not
decisive". Though Athens is hopeful of a positive statement, the
cash-strapped southern European state and its EU and IMF lenders
remain at odds over budget, labor and pension issues.
Adam Myers, European head of FX strategy at Credit Agricole in
London, said markets had shifted to a more pessimistic view of
Greece's talks with its creditors in the past few weeks.
"They (the Greeks) are going to make their next payment but even
so ... I get the feeling in the market that there are
increasingly more people who are positioning for a Grexit."
New Zealand's dollar was the biggest mover among major
currencies, skidding 1.5 percent against its U.S. counterpart to
a seven-week trough of $0.7372 <NZD=D4> as speculation that the
country's central bank could cut rates gathered momentum.
Against the yen, the U.S. dollar stood little changed at 119.90
<JPY=>, after Friday's mixed U.S. jobs data failed to offer much
of a buying incentive.
The U.S. non-farm payrolls numbers showed a rebound in April,
but a significant downward revision to the March figure, and
weaker-than expected wage growth. That supported bets that the
U.S. Federal Reserve will not begin hiking rates until late in
2015.
Following last week's unexpected outright win for the
Conservatives in Britain's parliamentary elections, sterling
stayed close to a 2-1/2-month high, up 0.1 percent at $1.5474 <GBP=D4>.
Wednesday's Bank of England Inflation Report would be the main
focus for the pound this week, analysts said.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Toby Chopra)
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