Euro rises as Greece offers New Proposals to avert Default

The euro rose against the dollar on Monday on a glimmer of hope that Greece may avert a debt default after Athens offered new proposals to foreign creditors ahead of the emergency euro zone summit later in the day.

The common currency EUR= ticked up 0.3 percent to $1.1383, inching closer to a one-month high of $1.1440 hit on Thursday.

But many investors remained cautious because it was not immediately clear how far the new proposals yielded to creditors’ demands for additional spending cuts and tax hikes, nor whether creditors can stomach the offer.

“The euro is surprisingly solid. It’s either that markets are still betting that some sort of fix can be found for Greece’s funding woes or speculators are closing their short positions,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“Many players are sitting on the sidelines and nervously waiting for news headlines from Europe. It’s all about the euro today.”

After four months of wrangling and with anxious depositors pulling billions of euros out of Greek banks, Prime Minister Alexis Tsipras’ leftist government showed a new willingness at the weekend to make an offer which they hope will unlock frozen aid and avert default.

Tsipras will meet European Commission President Juncker, ECB President Mario Draghi, IMF head Christine Lagarde and euro zone finance ministers chairman Jeroen Dijsselbloem 11 a.m. (0500 EDT).

Euro zone finance ministers are due to meet 90 minutes later and a summit of euro zone prime ministers and presidents is also scheduled later in the day.

“Greece will be reaching a climax this week and markets will be extremely nervous. The markets are on the whole moderately hopeful on a deal. But it is difficult to tell the outcome as this will be a highly political decision,” said Masakazu Kabeya, chief global strategist at Daiwa Securities.

Speculation is rife that, if no deal were reached on Monday, Greece may need to impose capital controls on Tuesday to avert a banking crisis as savers keep withdrawing funds from banks.

Bank of Greece Governor Yannis Stournaras met senior bankers on Friday and told them to brace for a “difficult day” on Tuesday if no deal is reached, two bankers at the meeting told Reuters.

Against the British pound, the common currency rebounded from Friday’s three-week low of 71.26 pence and last stood at 71.615 pence EURGBP=D4.

To the yen, the euro EURJPY= gained 0.3 percent to 139.68 yen.

The dollar JPY= was little changed at 122.72 yen after shedding 0.2 percent the previous session. The benchmark U.S. Treasury 10-year yield US10YT=RR fell about 8 basis points on Friday on safe-haven bids generated by Greek debt angst.

Source: Reuters