The euro was broadly lower on Tuesday as investors braced for the near certainty that Greece will default on a loan from the International Monetary Fund, while the US dollar benefited from month- and quarter-end buying. The euro was last down 0.8 percent against the dollar at $1.11475. Month- and quarter-end flows, which stem from global fund managers and investors' rebalancing their currency exposure based on stock and bond market movements over the given period, also boosted the dollar.
"There was heavy euro selling, heavy dollar buying at end-of-quarter, end-of-month," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. The euro was still on track for a 3.9 percent rise against the dollar for the quarter, which would mark its first such percentage gain in five quarters and its strongest since the third quarter of 2013. For June, the euro was also on track for its first percentage gain against the greenback in two months, at 1.4 percent.
Analysts said short-covering capped the euro's losses. Traders who had bet against, or "shorted," the euro continued to repurchase the currency after it rallied on Monday from a four-week low $1.09550 to a nearly one-week high of $1.12790, they said. The focus was also on how popular opinion takes shape in Greece before it votes on Sunday on creditors' terms for a bailout. The recently announced referendum has prolonged uncertainty over the country.
The deadline for the payment to the IMF expires Tuesday at 6 pm EDT (2200 GMT). Analysts said, however, that optimism for a Greek resolution lingered because of the upcoming referendum, also limiting the euro's losses. "There's a little bit more optimism on one, the referendum will take place coming up on Sunday, and that we are likely to get a 'yes' vote," said Alan Ruskin, global head of FX strategy at Deutsche Bank in New York.
The euro was last down 1 percent against the yen at 136.28 yen. The dollar was down 0.18 percent against the yen at 122.320 yen after earlier hitting a five-week low of 121.930 yen. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.73 percent at 95.483.
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