Euro on the defensive as Greek debt talks break down

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SYDNEY The euro lurched lower first thing in Asia on Monday after efforts on ending a deadlock between Greece and its creditors broke up in failure over the weekend.

Tellingly, the talks on Sunday lasted less than an hour, suggesting the differences between the two parties may be too wide to bridge.

"With no deal in sight, expectations for default and exit are likely to rise sharply in the days ahead," said Elsa Lignos

senior currency strategist at RBC.

The common currency fell 0.3 percent to $1.1227 EUR=, retreating further from last week's peak of $1.1387. Against the yen, the euro slid 0.5 percent to 138.33 EURJPY=R, well off a recent high of 141.02.

Euro zone finance ministers would now tackle the issue when they meet on Thursday. But with no technical deal apparently possible, they are likely to have to make difficult political decisions on Greece's membership of the currency bloc.

Failure to keep Greece in the euro, after years of arduous negotiations and two emergency bailouts totaling 240 billion euros, would send it lurching into the unknown and mark a historic blow to the EU's most ambitious project.

Pressure on the euro helped the dollar index .DXY edge up 0.2 percent to 95.101, pulling it away from a near one-month trough of 94.322 set last week.

The greenback was subdued against the yen, slipping a mere 0.1 percent to 123.29 JPY=.

Dollar bulls will be hoping the Federal Reserve will offer a clear signal on the timing of its first interest rate hike in nearly a decade after its June 16-17 policy meeting.

However, many suspect Chair Janet Yellen will merely repeat that a move is data dependent and likely only if the economy continues to improve as expected.

Other major currencies also got off to a quiet start with the Australian dollar holding on to last week's 1.2 percent gain. It last traded at $0.7735 AUD=D4, little changed from Friday's close.

There is no major economic news out of Asia on Monday.

"Against the yen, the euro slid 0.5 percent to 138.33 EURJPY=R, well off a recent high of 141.02.Euro zone finance ministers would now tackle the issue when they meet on Thursday"Reserve Bank of Australia Assistant Governor, Christopher Kent, is due to speak on the transmission of monetary policy at 0730 GMT (3:30 a.m). Kent is the chief economic advisor to the RBA Governor and the Board.

(Editing by Richard Pullin)