Euro drops below $1.1 as Greek exit risks grow

The European single currency briefly dropped below $1.1 on Monday as investors grow concerned Greece is headed for a debt default and a possible eurozone exit.

The euro fell to $1.0952 in Asia early Monday from $1.1160 in New York on Friday, dropping through the $1.1 mark for the first time since early June.

The single currency subsequently edged up, changing hands at $1.1009 in the afternoon.

The yen soared as investors sought safer investments for their cash.

The euro bought 135.41 yen and the dollar was at 122.88 yen, compared with 138.26 yen and 123.89 yen in US trade.

Greek Prime Minister Alexis Tsipras stunned Europe with a surprise call for a July 5 referendum on the latest cash-for-reforms package and advised voters against backing a deal that he said spelled further "humiliation" for his country.

The European Central Bank said Sunday it would not increase its financial support to Greek banks.

Tsipras announced that Greek banks and the Athens stock market will be closed on Monday and capital controls will be imposed, pleading for calm after anxious citizens emptied ATMs in a dramatic escalation of the debt crisis.

Emma Lawson, senior currency strategist at National Australia Bank, said investors were now seeking safer investments amid uncertainty over how the Greek situation would develop.

"Risk aversion. This is not like before," she said in a note.

"We have had a slow bank jog in Greece (as opposed to a bank run) and most thought that there would be an agreement eventually, at the last minute. That is no longer true.

"We've been using the term 'crisis' loosely for some time now but really, it wasn't. Now is crunch time."

Shinya Harui, Nomura Securities currency analyst, said "markets are on a risk-off mode and funds are flowing to safer assets" such as the yen.

But Harui noted: "I don't think financial markets will plunge into turmoil."

"It is unlikely that the crisis will spill over to sovereign bonds of Italy, Spain and other neighbouring countries as the ECB has prepared a safety net," he told AFP.

"Bank exposure to Greek debts has also significantly dropped" from a few years ago, he said.

The dollar was higher against other Asia-Pacific currencies.

The greenback firmed to Tw$30.97 from Tw$30.90 on Friday, to 13,349 Indonesian rupiah from 13,315 rupiah, and to 33.86 Thai baht from 33.77 baht.

It also climbed to 63.85 Indian rupees from 63.62 rupees, to Sg$1.3525 from Sg$1.3443, to 1,122.44 South Korean won from 1,114.99 won, and to 45.18 Philippine pesos from 45.12 pesos.

The Australian dollar slipped to 76.50 US cents from 77.23 cents, while the Chinese yuan eased to 19.72 yen from 19.89 yen after another interest rate cut by China's central bank.