The dollar and the yen outperformed other G10 currencies on Friday as the risk appetite faded on Greek issue. Affected directly by the Greece debt problem, the euro dropped further against the dollar to as low as 1.35 level. poised to test next key support level at 1.34.

German Chancellor Angela Merkel yesterday asked Greek to turn to IMF instead of EU for aid, disappointing those expected EU to provide Greece lending facility. First of all, Greece’s target to reduce debt from 12% to 3% in 2 years from now seems unpractical. Secondly, Greece’s first bond auction after the debt issue burst went through well mainly because EU meetings held during auction period gave market positive impression that EU is willing to help Greece out while there is never concrete plan reached by EU. We look to see more volatility in the euro when EU summit decide whether to offer lending facility to Greece.

The commodity currencies was dragged down as risk aversion rose today while the loonie rebounded after the report showed retail sales and CPI rose more than expected, reaffirming the nation is on the course of steady recovery.

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