Euro drops as eyes turn to Greece

The euro has dropped against the dollar as attention continues to focus on a proposed deal between Greece and its creditors. The country’s finance minister, Evangelos Venizelos, has reacted angrily to a suggestion that Greece should let European institutions take control of budget policy.

The euro has fallen 0.3 per cent to $1.3178. The single currency rallied last week because a softening in the dollar and a lack of negative news coming from the eurozone. Credit Suisse Tokyo’s chief currency analyst, Koji Fukaya, said that the markets would be keenly focused on what Greece does about its problems and the results of the EU summit and that this was likely to mean that any gains made by the euro were likely to be choppy.

Eurozone leaders are gathering to try and work out a way of stimulating growth and implementing new budget rules. At the weekend, Venizelos affirmed that Greece would make good on its promises. He said that putting a country before the problems of national dignity and economic assistance showed that historical lessons had not been learned.

According to traders, the euro is still vulnerable to short-covering and Friday’s figures showed that speculators were boosting short positions.

The euro was up from 100.60 last week against the yen to 101.15. It also strengthened against the Australian dollar from a low of A$1.2220 earlier in the month to A$1.2458. Trading is also likely to be affected by the continuing friction between Iran and the West because of its nuclear activity.