The euro fell against the safe haven Swiss franc and yen on Friday as investors cut exposure to the single currency before the weekend amid worries over whether Greece and its creditors can avert a debt default. Some traders expect further risk reduction on Friday, a factor likely to underpin both the franc and the yen. Still, many investors and fund managers held out hopes that a last-minute deal could be stitched to keep Greece in the euro zone.
Greece failed again on Thursday to clinch a deal with its international creditors, setting up a last-ditch effort on Saturday to avert a default next week. The leaders of Germany and France discussed extending Greece's bailout programme and providing financing with Greek Prime Minister Alexis Tsipras on Friday, a French source said. The euro was down 0.25 percent against the yen at 138.15 yen, while it shed 0.45 percent against the Swiss franc to trade at 1.0440 francs. Both the yen and the franc tend to gain during times of financial market stress.
"With very little clarity about Greece, who wants to go into the weekend holding positions, only to be stopped out by volatility early on Monday?" Jeremy Stretch, head of currency strategy at CIBC World Markets, said. "We may see a bit of a relief rally in the euro if there is a compromise at the weekend, but I would prefer to sell into those rallies, as there is still the case of monetary policy divergence between the euro zone and the United States."
The euro edged down against the dollar to $1.1190, drifting in a thin $1.1179-$1.1220 range, even narrower than its $1.1153-$1.1228 range on Thursday. It was down about 1.4 percent for the week. Data out of the euro zone on Friday was mixed. While M3 money supply decelerated unexpectedly in May, loans to the private sector rose from the previous month. In view of this, the ECB is likely to keep monetary policy accommodative for sometime to come.
"On the assumption that Greek does find an eleventh hour deal with its creditors that allows it to avoid default for now, it is likely that flows will shift back out of the euro into riskier assets," said Jane Foley, senior currency strategist at Rabobank. The dollar was weaker against the yen at 123.40, and off this week's high of 124.38 yen. Data released early on Friday showed Japan's household spending in May rose for the first time in more than a year. Other data showed a robust jobs market fuelled hopes that companies will begin lifting wages needed to spark inflation towards the Bank of Japan's 2 percent goal, though core consumer prices rose 0.1 percent in the year to May.
