The euro rose against the yen as European officials signaled confidence that a deal would be reached on Greek aid after the nation submitted a last-minute proposal.
The 19-nation currency strengthened versus most of its major peers as Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, said the plan from Greece was a positive step. European Commission President Jean-Claude Juncker said he expected an accord to be reached this week. German bonds fell on reduced haven demand and JPMorgan Chase & Co. said global markets have little cause for panic about Greece.
“The market is genuinely optimistic that there’s some sort of agreement that’s going to be reached,” Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG in New York, said by phone, citing rising European equities and bund yields.
The euro added 0.5 percent to 139.91 yen as of 5 p.m. New York time. It fell 0.1 percent to $1.1341. The U.S. currency strengthened 0.5 percent to 123.37 yen.
Of 899 hedge funds, money managers and other trading desks surveyed by Barclays Plc this month, more than half forecast only “a small negative” from Greece leaving the common currency, thanks to its minor contribution to regional growth and buffers to limit contagion. A further 28 percent see contagion limited to peripheral economies.
While it’s no longer “unthinkable” that Greece may leave the European Monetary Union, global markets should not be overly concerned, according to JPMorgan.
“The risk scenario of Greek exit from the EMU is a drama for Greece, but in this analyst’s view, not for world markets,” Jan Loeys, chief market strategist at the bank, wrote in an investor note before the new proposal. “Claims on Greece are concentrated at the European Central Bank and EU institutions.”
While the bank suggested investors reduce bets that peripheral euro-area bonds will outperform German bunds, it said any impact on stock markets from a Greek exit would be limited to Europe.
The euro has been resilient amid the standoff over Greece, rising 3 percent in the past month, making it the second-best performer behind the Swedish krona in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
The latest remarks from Europe are fanning optimism that an eventual deal will be struck, Bipan Rai, director of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said by phone from Toronto.
“The market is taking that in a euro-positive manner as it removes some level of uncertainty,” Rai said. “All of these comments seem to indicate that there is a light at the end of the tunnel.”
Brian Meath, a senior portfolio manager of multi-asset strategies at Russell Investments in New York, said he’s neutral on the euro, while buying European equities.
The currency “needs to strengthen a little bit more before we would take a proactive euro-short position,” said Meath, referring to a bet that the currency will fall against the dollar. Russell manages $272 billion.