* Fears of messy Greek exit from euro zone persist
* EU leaders offer no comfort
* Subdued reaction to decline in China factory activity in
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, May 24 The euro hovered just
above its 22-month low against the dollar on Thursday and
remained vulnerable to further declines as the prospect of a
Greek exit from the euro zone kept investors on tenterhooks.
The euro eased 0.1 percent to $1.2575. It fell to
about $1.2545 the previous day, its lowest level since July
2010. That level should provide initial support, followed by
The euro drew little comfort from an informal summit of
European Union leaders that shed no new light on how the euro
zone nations intend to tackle its debt crisis, including the
threat of Greece's exit from euro.
"It's still hard to see what the endgame will be like," said
a trader at a Japanese bank in Tokyo.
European Union leaders urged Greece to stay the course on
austerity and complete the reforms demanded under its bailout
Three officials told Reuters that members of the currency
bloc have been warned to prepare contingency plans in case
Greece quits the euro, an eventuality that the German central
bank said would be testing, but "manageable".
"With a Greek exit once again being discussed, the pressure
on the euro should continue especially with the lack of clarity
on any of the pressing issues," analysts at BNP Paribas wrote in
a client note.
"EUR weakness is likely to be amplified against the USD and
the JPY as the market seeks refuge (in the safe-haven pair) as
negative risk sentiment persists."
The next major support level for the euro is seen at
$1.2500, although some market players say the single currency is
at risk of an even steeper drop.
Daisuke Karakama, market economist at Mizuho Corporate Bank
in Tokyo, said the euro may drop to $1.20 by the end of June.
The $1.20 level is key for the euro because the $1.20 to
$1.22 range is seen as being roughly consistent with purchasing
power parity, Karakama said.
In the past, there have been cases where the euro's falls
versus the dollar have stalled near levels consistent with
purchasing power parity, he added.
"One point to watch will be whether the euro can break below
such levels," Karakama said.
With the euro under pressure, the safe haven dollar held its
ground. Against a basket of major currencies, the dollar stood
at 82.085 . That was close to a peak of 82.221 hit
on Wednesday, the dollar's highest level since September 2010.
The dollar held steady against the yen at 79.49 yen.
Major currencies reacted little to data showing that China's
factories took a hit in May as export orders fell sharply.
The Australian dollar held steady on the day at $0.9750
, staying above a six-month low of $0.9690 hit on