Euro Volatility Increases to 3 1/2-Year High as Greek Talks Fail

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Price swings in the euro against the dollar increased to the highest level since 2011 after the latest negotiations on Greece’s bailout fell apart.

The currency fluctuated as European policy makers raised pressure on Greece to return to the negotiating table and make further concessions to unlock aid. The euro is trading higher than its averages of the past 50 and 100 days. It erased a decline after data showed the U.S. economy is struggling to regain momentum.

“This is a high-volatility event,” said Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA. “We’re not buying into the view that a Greek exit will be good for the euro zone. Ultimately, it’ll probably lead to a weaker euro.”

Implied one-month volatility for euro-dollar trading jumped 0.33 percentage point to 14 percent as of 3:30 p.m. New York time. It earlier reached 14.39 percent, the highest level since December 2011, according to data compiled by Bloomberg. That compares with 9.01 percent for dollar-yen, and 9.10 percent for the pound-dollar pair.

The euro rose 0.2 percent to $1.1288, and was up 0.2 percent at 139.27 yen. The dollar was little changed at 123.46 yen.

Euro Levels

The Greek impasse hasn’t deterred the euro from rallying. The single currency gained 2.5 percent during the past two weeks on optimism the region’s falling inflation rate has reached a bottom and economic growth is gathering steam.

“If you’re just looking at the chart you wouldn’t have imagined there is any particularly disturbing news out of Brussels or Greece,” Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt, said by phone. “The vicious cycles that were in place in 2011, 2012, we’re far away from them.”

The focus of negotiations moves to a meeting in Luxembourg of euro-area finance ministers on June 18, and may become a make-or-break session deciding Greece’s ability to avert default and its continued membership in the 19-nation euro area.

“Thursday is really the crunch meeting,” Trevor Greetham, head of multi-asset at Royal London Asset Management Ltd., which manages around $97 billion, said in an interview on Bloomberg Television. “We’re going to see volatility during the week. Things are really kind of hotting up.”

With signs that negotiating fatigue was stoking intransigence on all sides, some euro-area officials publicly raised the prospect of Greece’s exit from the currency region as the Greek government suggested it had reached the limits of its ability to make concessions.

“There’s still an enormous amount to play for, but as things stand, you’d have to say that the risk of some kind of a default event at the end of June” is close to 50:50, Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney, said in a Bloomberg Television interview.

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