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As
talks between debt-laden Greece and its creditors ground on with
no clear sign that a deal was on the table, the euro bounced
around a little against the dollar in choppy trade, but stayed
within its recent ranges. By 7.50 a.m. EDT it was flat at
$1.1210.
The biggest mover among major currencies was the franc, which
shed as much as 0.8 percent against the euro to 1.05465, after
SNB Chairman Thomas Jordan's warning shot. Against the dollar,
it traded at 0.9416 francs, its weakest since June 8.
A failure by Greek officials to reach an aid-for-reforms deal
with the country's creditors would be likely to spark massive
safe-haven flows into the Swiss currency.
"The Swiss are always going to try and talk their currency
down," said one currency trader at a major international bank in
London. "They tried to keep it weak for all those years and they
obviously couldn't stem the tide. But even if it's not a
specific policy with a specific rate, they will jawbone."
The euro has traded in the $1.09-$1.14 area for several weeks,
with strategists arguing over the extent to which it has been
affected by talks on Greece.
Some analysts reckon that with the market betting some sort of a
Greek deal will be reached, the euro's direction against the
dollar can once again be dictated by fundamental factors. With
ultra-loose monetary policy in the euro zone and U.S. interest
rates seen moving higher, that means a weaker euro.
Neil Mellor, a currency strategist at Bank of New York Mellon in
London, said the euro would fall on good news from Greece, as
investors used it for carry trades -- borrowing it and then
selling it to buy higher-yielding currencies.
"What has been fairly clear is that every time there's a chance
of a deal the euro plummets, and every time there's
disappointment coming along, it reverses course," he said.
"The only interpretation you can place on that is that the
market is looking to use the euro as a funding currency in a
carry trade ... The prerequisite of a carry trade is relative
stability, so if a Greek deal is on, you sell the euro."
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Catherine Evans)
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