Euro down as market frets over EU debt after IMF chief's arrest

 The euro fell half a cent in opening Asian trade Monday as markets fretted that talks on Greece's debt crisis would be thrown into disarray by the arrest of IMF chief Dominique Strauss-Kahn.

The euro dropped to $1.4056 in Tokyo morning trade, down from $1.4108 in New York late Friday. It recovered slightly to stand at $1.4076 mid-morning.

The single European currency fell to 113.61 yen before recovering to 113.94, down slightly from Friday's close. The dollar fetched 80.98 yen, compared to 80.71 yen.

Investors were mulling the implications of the arrest in the United States of the International Monetary Fund boss on charges of attempted rape, criminal sexual assault and unlawful imprisonment.

Eurozone finance ministers were scheduled to meet later Monday to discuss finalising an IMF-backed bailout for Portugal and were expected to discuss Greece's debt position too.

The Washington DC-based fund named its number two official John Lipsky as acting managing director but currency strategists said the turmoil is bound to stall efforts to reach a solution in Europe.

"Any delay is likely to rattle the nerves of euro bulls," Gareth Berry, currency strategist at UBS, told Dow Jones Newswires.

"For a few days at least, the market will likely suspect leadership paralysis at the IMF. Again, the euro has most to lose from this, given the IMF is now active or becoming active in three eurozone countries (including Ireland)."

The scandal is seen likely to bury Strauss-Kahn's long-held ambitions to be elected president of France. Widely praised for his stewardship of the IMF, he is so well known in France he is often referred to by his initials, DSK.

Athens received a 110-billion-euro bailout from the EU and IMF a year ago, but a severe recession has complicated its efforts to bring its finances in order.

The EU Commission, the IMF and Germany are calling for Greece to reschedule its massive debt burden, due to the deteriorating situation, the German daily Die Welt said in its Saturday edition.

"When you look at the new data, you know the situation has changed," a European Commission source was quoted as saying.

The EU Commission spokesman on economic affairs, Amadeu Altafaj, dismissed the report as "absurd information."

"A restructuring of Greek debt is out of the question," he told AFP.

The Australian dollar was dragged lower too, with the commodity unit falling to US$1.0542 from US$1.0581 early on, before pulling back to US$1.0559.

Grant Turley, chief currency strategist at ANZ Bank in Sydney, said the IMF news means the Australian dollar could test as low as US$1.0450 and dealers were bracing for bad news on efforts to reach a conclusion to Europe's crisis.

"It's going to be a bit of a mess and it's going to add to the uncertainty," he said.

- AFP/ir