By Jamie McGeever
LONDON (Reuters) - The euro slid to a two-week low and a rally in European shares stalled on Wednesday after a Greek official said the country may not make an upcoming repayment to the International Monetary Fund.
The euro's fall follows remarks from a European Central Bank board member on Tuesday that the central bank could increase the pace of its bond-buying in May and June, bringing its losses against the dollar this week to more than 3 percent.
The pause in European shares mirrored the sticky performance of Asian bourses, although the Nikkei in Tokyo jumped to a 15-year high after Japan posted surprisingly strong economic growth for the first quarter.
European bank shares were in focus were in focus after Switzerland's UBS
Ahead of minutes from the U.S. Federal Reserve's Open Market Committee due later on Wednesday, the focus for investors will likely be on Greece and the euro's steep fall this week.
"A deal for Greece would remove a big risk factor from the euro and be euro-positive. Failure, on the other hand, could be disastrous," said Marshall Gittler, head of global FX strategy at IronFX.
The euro fell as low as $1.1065
It was last down 0.4 percent on the day at $1.1100.
The Greek government's parliamentary speaker said on Wednesday that Athens will not make a payment to the IMF that falls due on June 5 unless it has reached a deal with its creditors by then.
The dollar was broadly stronger on Wednesday following punchy U.S. housing data on Tuesday, rising to a two-month high against the yen above 121.00 yen
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Japan's Nikkei stock index <.N225> ended up 0.9 percent at a fresh 15-year peak, helped by a weaker yen and data showing the economy grew at a 2.4 percent annualized rate in the January-March period. That was its fastest pace in a year, beating the consensus estimate for 1.5 percent growth.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS>, however, was down 0.3 percent.
European shares were mixed following Tuesday's 1.65 percent surge, unable to draw much of a boost from the euro's weakness against the backdrop of increasing uncertainty over Greece.
The FTSEurofirst 300 index of leading shares was flat at 1606 points <.FTEU3>, while Germany's DAX <.GDAXI>, France's CAC 40 <.FCHI> and Britain's FTSE 100 <.FTSE> were all down around 0.2 percent.
U.S. futures pointed to a flat open on Wall Street
Data showed that U.S. housing starts in April jumped to their highest level in nearly 7-1/2 years and building permits soared, raising hopes that the economy was regaining strength after stalling in the first quarter but also rekindling fears the Fed would raise interest rates sooner rather than later.
"We believe the minutes may describe a conversation regarding the criteria for a rate hike ? specifically, a discussion of the developments required to make Fed officials 'reasonably confident' that inflation will accelerate to 2 percent over the next two-to-three years," Credit Suisse analysts said in a note on Wednesday.
The consensus among economists and traders points to the Fed raising rates in September.
Crude oil futures were off session highs but still took back some lost ground after sinking more than 3 percent overnight as the dollar strengthened.
Brent
(Editing by Hugh Lawson; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
