Euro slide continues as Greeks walk out after “absurd” request they repay debt

(Bloomberg) — The euro weakened for a third day against the dollar as talks between Greece and its creditors in the region ended without an agreement.

The common currency dropped to a one-week low versus the yen on Monday after Greece’s newly elected government said it couldn’t accept proposals for it to stick to the terms of the current bailout agreement. The Bank of Japan begins a two-day policy meeting Tuesday. The Aussie erased losses after minutes of this month’s Reserve Bank of Australia meeting suggested another interest-rate cut isn’t imminent.

“Greece and Germany came to the talks with different preconditions, and the lack of compromise is weighing on the euro,” said Yuji Saito, director of foreign exchange at Credit Agricole SA in Tokyo.

The 19-nation shared currency fell 0.2 percent to $1.1332 as of 10:09 a.m. in Tokyo, after dropping 0.3 percent Monday. It slid 0.3 percent to 134.11 yen, extending a three-day, 1.5 percent decline. Japan’s currency gained 0.1 percent to 118.35 per dollar.

Greek Finance Minister Yanis Varoufakis led a Greek government delegation to Brussels with the aim of winning a six- month bridge package to give Greece the time and financial space to negotiate a post-bailout settlement. Creditors said that the Greek government must abide by the agreements struck by previous administrations. The Greek government said in an e-mailed statement that was “absurd” and “unacceptable.”

‘Policy Sherpas’

“Good luck to the policy sherpas behind the scenes trying to work to a constructive solution if that is anything to go by,” ANZ Bank New Zealand Ltd. analysts including Sam Tuck, a senior currency strategist in Auckland, wrote in a research note to clients on Tuesday. “It’s looking more and more like the prisoner’s dilemma” for Greece, the note said, referring to a problem in game theory in which a rational choice for an individual has negative consequences for a group.

The euro has weakened 4.1 percent this year against a basket of developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes as the European Central Bank prepared a bond-buying program and Greek elections roiled the nation’s bond and stock markets. The dollar rose 3.2 percent, while the yen gained 4.6 percent.

The yen held its longest rally in a month versus the dollar as the BOJ gathers to discuss policy. None of the 35 analysts surveyed by Bloomberg News Feb. 5-10 predict additional stimulus will be announced Wednesday. Still, 26 analysts in the survey said the central bank will ease policy by October.

Australia’s dollar rose 0.1 percent to 77.80 U.S. cents after minutes of the RBA’s Feb. 3 meeting showed policy makers debated whether to cut borrowing costs immediately or wait a month before choosing to lower the benchmark rate to 2.25 percent.

“The fact that RBA debated whether to move in February or March seems to suggest there may not be urgency for a follow-up cut,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “That’s given support to the Aussie dollar.”