EUR/USD Drifts Below 1.1050 Ahead of EZ Summit

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 EURJPY=EBS, moving away from a six-week low of 133.700 yen plumbed on Monday.

Against the dollar, the euro edged down about 0.1 percent to $1.1044 EUR=EBS, 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.