The euro rallied the most in 10 weeks versus the dollar amid optimism that Greece is moving closer to ending months of acrimony with creditors and lessening the threat of default.
The 19-nation currency extended its gain as the creditors were said to be wrapping up a plan to break a deadlock for the disbursement of additional funds, even as Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance ministers’ group, said they are still far from a deal. The currency also advanced as consumer prices in the region rose on an annual basis last month for the first time since November before the European Central Bank meets Wednesday.
“Inflation is heading in the right direction and Greece appears closer to clinching a rescue,” Joe Manimbo, an analyst at Western Union Business Solutions, a unit of Western Union Co. in Washington, said by phone. “It’s more of a relief rally,” that hinges on the prospect of a Greek deal and the ECB’s economic outlook, he said.
The euro climbed 2.1 percent to $1.1151 as of 5 p.m. in New York, after touching $1.1192, the biggest gain since March 18. That more than wiped out Monday’s decline of 0.5 percent. It rose 1.5 percent to 138.40 yen.
The dollar fell 0.5 percent to 124.11 yen, after appreciating earlier to 125.05 yen, the strongest level since December 2002.
The euro’s rally accelerated after it rose above $1.10, a key level on price charts that prompted buy orders in otherwise thin trading conditions, John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark, said by e-mail.
After four months of antagonism and extended deadlines, signs of greater urgency in efforts to end the impasse and decide Greece’s fate have emerged.
Talks lasted into the early hours of Tuesday morning in Berlin, involving German Chancellor Angela Merkel, International Monetary Fund chief Christine Lagarde, ECB President Mario Draghi, French President Francois Hollande and European Commission President Jean-Claude Juncker. The goal was to hammer out an offer that Greece could consider in coming days, according to two people familiar with the plan.
The euro was boosted by “an uptick in consumer prices along with the fact that there’s the possibility of an 11th-hour deal coming through in Greece,” Scott Smith, senior market analyst at Cambridge Global Payments, a global foreign-exchange and payments provider, said from Calgary.
The inflation rate in the euro area increased to 0.3 percent in May, the European Union’s statistics office in Luxembourg said. That exceeded the 0.2 percent forecast by economists in a Bloomberg survey. Core inflation accelerated to 0.9 percent, the fastest in nine months. Separate German data showed unemployment declined for an eighth month in May.
Bonds tumbled from Austria to Portugal, with the yield on Germany’s 10-year bunds rising as much as 17 basis points to 0.71 percent.
Europe’s common currency gained 2.1 percent in the past week, the best performance among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes.
The ECB meets Wednesday in Frankfurt. The central bank is in the early days of a 1.1 trillion-euro ($1.2 trillion) bond-buying program which Executive Board Member Benoit Coeure said would be front-loaded in May and June.
The ECB’s latest projections foresee an average inflation rate of zero this year, rising to 1.8 percent by 2017. Its main refinancing rate is set at 0.05 percent while the deposit facility is at minus 0.2 percent.