Dollar strengthens as Greek debt crisis weighs on euro

Dollar strengthens as Greek debt crisis weighs on euro

TOKYO - The dollar firmed against major counterparts on Tuesday, as ongoing anxiety over Greece's debt crisis helped push the euro toward a one-week low.

Two Greek finance ministry officials told Reuters that Athens paid about 750 million euros to the International Monetary Fund a day before it was due, but this was not enough to alleviate anxieties that the country will be able to make future payments.

As euro zone finance ministers met in Brussels to discuss a cash-for-reforms deal with Athens, Greek Finance Minister Yanis Varoufakis said on Monday that a referendum on Greece's bailout is not planned for the time being, and that capital controls have not been considered for the country.

Traders see the chances of Greece leaving the euro zone at slightly less than one in four, a Reuters poll found.

"The political risk premium is certainly a factor there, and it's quite volatile there with the markets going back and forth with the negotiations," said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. "We still like the euro directionally lower over the longer term, as a mix of independent euro weakness combined with independent US dollar strength."

The euro was down slightly on the day at $1.1154 after coming within a few ticks of Monday's trough of $1.1131 and well away from a two-month high of $1.1392 touched last week.

Against the yen, the dollar added about 0.1 per cent to 120.17 yen, well above its overnight low of 119.40 and solidly within its ranges held since mid-March.

The dollar index, which measures the US unit against a basket of six major rivals, was slightly higher on the day at 95.029.

The New Zealand dollar marked a fresh 7-1/2-week low of $0.7328 earlier and last stood at $0.7350, up about 0.3 per cent on the day after plunging in the previous session after ANZ bank predicted that the Reserve Bank of New Zealand (RBNZ) would cut rates in both June and July.

The kiwi posted its biggest one-day decline against the US unit since late 2011 on growing expectations that the central bank would cut rates.

The pound edged down about 0.1 per cent on the day to $1.5568 , taking a breather after scaling its loftiest peak of the year against the greenback on Monday, rising as high as $1.5614 in the wake of Prime Minister David Cameron's British election victory.

On Monday, the Bank of England kept interest rates steady at a record-low 0.5 per cent as expected. On Wednesday, Governor Mark Carney will present a quarterly update to the central bank's forecasts growth and inflation predictions.

"If the BoE maintains a neutral outlook that places equal emphasis on the upside and downside risks, sterling will give up its gains quickly," Kathy Lien, managing director at BK Asset Management in New York, said in a note to clients.

"However we think they will be optimistic about the country's longer-term inflation and growth outlook and this view will drive further gains in the pound," she said.

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