Euro weak in Asian trade ahead of EU summit

The euro lost ground against the dollar and yen in Asian trade Wednesday as nervous investors await a summit of European Union leaders focusing on Greece's possible exit from the eurozone. The euro fetched $1.2670 and 100.80 yen in Tokyo afternoon trade, lower than $1.2684 and 101.45 yen in New York late on Tuesday. The dollar slipped to 79.54 yen from 79.98 yen. Traders were nervously eyeing the Wednesday talks in Brussels after former Greek Prime Minister Lucas Papademos warned over Athens' possible pullout from the eurozone. "The risk of Greece leaving the euro is real," he said. Investors fear Greece's fiscal woes will have a ripple effect across the 17-nation bloc, including Spain where tens of thousand of striking teachers and students and their supporters demonstrated countrywide on Tuesday to protest against deep cuts to education spending. "I personally don't think much will come out of the EU Summit that will drastically alter the situation in Greece or Spain," said Junichi Ishikawa, forex analyst at IG Market Securities in Tokyo. European leaders have promised a no-holds-barred debate on whether to guarantee each others' borrowings in future, seen as essential if Greece exits the single currency. Meanwhile, the Bank of Japan on Wednesday kept its key interest rate unchanged at between zero and 0.1 per cent, announcing no new easing measures but said it would keep a 70 trillion yen ($880 billion) asset purchase programme in place. The dollar's decline came as some market players were expecting further easing measures from Tokyo amid efforts to kickstart the world's third-biggest economy, said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ. "But I can't see the Japanese yen being bought any further, the impact should be momentary," she told Dow Jones Newswires. The yen's uptick also came after Japan said it logged a bigger-than-expected trade deficit of 520.3 billion yen in April, just a day after Fitch downgraded the nation's credit rating on concerns over its public debt. The dollar was trading higher against other Asian currencies. It rose to Sg$1.2769 from Sg$1.2671 on Tuesday, to 1,171.90 South Korean won from 1,163.80 won, to 9,316.00 Indonesian rupiah from 9,300.00 rupiah, to 31.51 Thai baht from 31.30 baht, and to 43.36 Philippine pesos from 43.16 pesos. The greenback also edged up to Tw$29.54 from Tw$29.52.