Euro Gains After Deepest Drop in 3 Months as Greece Deal ElusiveLananh Nguyen
The euro rallied after its biggest drop in three months as European leaders sought to break the deadlock over Greek debt.
The common currency strengthened against most of its major peers after falling versus all of them on Tuesday. Euro-area finance ministers adjourned a meeting on Greece, and will resume discussions Thursday, as a breakthrough on the terms attached to aid remained elusive. German bonds rallied on haven demand as Wolfgang Schaeuble, the nation’s finance minister, said progress was insufficient to reach a deal Wednesday.
“Given the ferocity of yesterday’s euro selloff and with uncertainty around Greece still lingering, the market doesn’t seem ready to jump 100 percent back into sell euro-dollar mode,” Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York.
The euro advanced 0.3 percent to $1.1205 as of 5 p.m. New York time, after diving 1.5 percent on Tuesday, the most in three months. The single currency rose 0.3 percent to 138.78 yen, erasing some of its 1.1 percent slump Tuesday. The dollar was little changed at 123.85 yen.
Germany’s 10-year government bond climbed, pushing the yield down 0.03 percentage point to 0.84 percent.
The euro has dropped 4.2 percent this year, the worst performer after New Zealand’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
“Our projection actually for the end of the year is parity” between the euro and dollar, Athanasios Vamvakidis, head of Group-of-10 foreign exchange strategy at Bank of America Merrill Lynch in London, said in a radio interview on Bloomberg Surveillance. The forecast is based on expectations that the Federal Reserve will increase interest rates in September and the European Central Bank will embark on a second round of quantitative easing at the end of next year, he said.
Greece’s creditors handed the government revised terms for an agreement as Prime Minister Alexis Tsipras expressed incredulity that his own list of proposals to secure bailout funds had fallen short.
Tsipras met for about five hours Wednesday with ECB President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Commission President Jean-Claude Juncker in an effort to reach a deal before Greece’s bailout expires and about 1.5 billion euros ($1.7 billion) in payments come due to the IMF on June 30.
The euro’s recent “counterintuitive” moves are explained by its use as a funding currency, Matt Weller, an analyst at Gain Capital Holdings Inc.’s Forex.com unit in Grand Rapids, Michigan, said in a note.
“When it looks like Greece and its creditors are making progress on a deal, traders pile back in to sell the euro,” Weller said. “Conversely, when the negotiations suffer a setback, as we’ve seen repeatedly over the last few weeks, including earlier today, the euro sees a seemingly implausible rally.”
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