Euro edges lower ahead of euro zone summit on Greece

Investors hope summit might offer Greece a way out of its debt crisis

The euro edged slightly lower in early Asian trading on Tuesday, but remained well off lows touched in the previous session ahead of a euro zone summit that investors hope might offer a way for Greece to climb out of its debt crisis.

After Greek voters overwhelmingly rejected austerity at a weekend referendum, France and Germany urged Athens on Monday to muster further proposals and restart talks with its lenders. The country's banks have already been closed for over a week, and only emergency funding can avert their insolvency.

Germany's EU commissioner told German newspaper Bild that the Greek government would probably have to start issuing IOUs to pay wages and pensions and settle outstanding accounts, and that would render Greece unsuitable to remain in the currency union.

The euro was nearly flat on the day against the yen at 135.47, moving away from a six-week low of 133.700 yen plumbed on Monday.

Against the dollar, the euro edged down about 0.1% to $1.1044, but remained well above its low of $1.0969 touched on Monday, when it remained above its one-month trough of $1.0955 set in late June.

Despite the common currency's relative reliance in the face of the Greek crisis, the country's murky future in the euro zone and its ongoing financial woes cloud the currency's long-term prospects.

"The ongoing uncertainty will be negative for the euro and risk appetite," Kathy Lien, managing director of FX strategy for BK Asset Management, wrote in a note to clients.  

"Therefore we like selling euros on the 1.11 handle. Anywhere below that provides poor risk reward," she said.

The dollar edged up about 0.1% to 122.70, a full yen above its six-week low of 121.700 yen hit on Monday as the Greek turmoil heightened the Japanese currency's safe-haven appeal.

The Swiss franc, another perennial safe-haven currency, edged slightly higher against the euro, which was buying 1.0414 francs.

The Swiss National Bank, which confirmed last week it had been intervening to weaken the franc, declined to comment on market speculation on Monday that it was continuing to intervene.

The Australian dollar slipped about 0.3% on the day to $0.7476 but remained above a six-year low of $0.7452 hit on Monday, as investors awaited the Reserve Bank of Australia's latest policy decision later in the session.

All 22 economists polled by Reuters expect the RBA to keep the cash rate unchanged at a record low 2%.