NEW YORK (Reuters) - The euro tumbled across the board on Monday, but was off the lows of the day, after Greece voted to reject the conditions tied to the troubled country’s debt bailout deal.
The resignation of Greek Finance Minister Yanis Varoufakis, however, was positive news for Greece, removing a “constant thorn” to any deal with the country’s creditors, said Dennis de Jong, managing director at FX.com in. Varoufakis’ exit partly prompted a comeback in the euro, analysts said.
The euro dropped to a one-week low against the dollar below $1.10, and skidded to a six-week trough versus the yen immediately following the “No” outcome. Selling was also seen in other higher-yielding currencies such as the Australian dollar and emerging market currencies.
The euro, however, has since stabilized in the London and New York sessions.
“The worst case scenario, we have been staring at, notably Grexit, has not hurt the euro much for now, while the best case scenario -- a negotiated settlement -- is not a great reason to buy the euro either, not least because it will be tough to reach a deal that has long-term credibility,” said Alan Ruskin, global head of FX strategy at Deutsche Bank.
The “No” vote leaves Greece in uncharted waters, however, risking a banking collapse that could force it out of the euro zone. Without more emergency funding from the European Central Bank, Greece’s banks could run out of cash within days.
In late New York trading, the euro was down 0.6 percent at $1.1044 EUR=, after falling to a one-week low at $1.0970. Against the yen, the euro fell 0.7 percent to 135.22 yen EURJPY=.
The euro was also down 0.6 percent versus sterling at 70.78 pence EURGBP=.
The safe-haven Swiss franc rose against the euro, which was down 0.2 percent at 1.0414 francs EURCHF=. The euro’s earlier resilience against the franc despite Greece’s “No” vote prompted talk of renewed intervention by the Swiss National Bank.
The SNB, which confirmed last week it had been intervening to weaken the franc, declined to comment on Monday’s speculation.
“This is going to be extremely messy, most divorces are,” Stephen Jen, a partner at hedge fund SLJ Macro Partners, said of the Greece situation.
“If you plot Iceland and Ireland on a GDP chart over the past few years, you can’t distinguish them. When we think about Greece, we do need to keep in mind that there are different paths to recovery.”
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Andrea Ricci and Andrew Hay