©2015 Bloomberg News
NQBR4X6K50XS

(Bloomberg) — The euro rose versus the dollar, extending last week’s gains, before an emergency summit in Brussels that may decide Greece’s future in the currency bloc as JPMorgan Chase & Co. said global markets have little cause for panic.

The single currency advanced against all except three of its 16 major peers as Greek Prime Minister Alexis Tsipras prepares to meet European Union leaders with the clock running down on a June 30 deadline for the nation to avoid default. Agence France-Presse said Greece had sent Brussels new proposals, while Reuters reported a European Commission official saying the latest offer a “good basis.”

“The euro is firm because of reports that Greece has made new proposals,” said Masafumi Yamamoto, a senior strategist at Monex Inc. in Tokyo. “The euro’s collapse is unlikely because markets have already priced in such risks. The Greek problem isn’t shaking up Italy and Spain.”
The euro advanced 0.2 percent to $1.1377 as of 11:32 a.m. in Tokyo after appreciating 0.8 percent last week. The shared currency gained 0.3 percent to 139.63 yen. The dollar was little changed at 122.72 yen.

Tsipras briefed German Chancellor Angela Merkel, French President Francois Hollande and Juncker on a Greek proposal to unlock bailout funds in phone calls on Sunday, according to an e-mailed statement from the Greek prime minister’s office. Monday’s emergency meetings include a gathering of euro-area finance ministers to prepare a summit of government leaders set to begin in the evening.

Martin Selmayr, chief-of-staff to European Commission President Jean-Claude Juncker, said the latest proposal from Greece was “good basis for progress,” Reuters said, citing a Twitter post.

Less Bearish

Hedge funds and other large speculators reduced bets the euro will weaken to 89,357 contracts in the week ended June 16, the least since July 2014, from 137,974 the week before, according to the Commodity Futures Trading Commission.

“A reduction in euro short positions over the past two weeks suggests speculators have more scope to build fresh bets against the currency,” Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., a margin-trading services provider, wrote in a note to clients.

While it’s no longer “unthinkable” that Greece may leave the euro bloc, global markets should not be overly concerned, according to JPMorgan.

Greek Drama

“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. “Claims on Greece are concentrated at the European Central Bank and EU institutions.”

While the bank suggested investors reduce bets peripheral euro-area bonds will outperform German bunds, it said any impact on stock markets from a Greek exit would be limited to Europe.
Roger Bridges, chief global strategist for interest rates and currencies at Nikko Asset Management Australia in Sydney, said the euro is getting support from a weaker dollar.

The dollar dropped against all except one of its 16 major counterparts last week as the Federal Reserve suggested a gradual pace of monetary tightening while maintaining its plan to raise interest rates this year.

“It’s a lot more about the Fed and the U.S. dollar may be pricing in this gradualism a bit,” Bridges said. “The market got very short the euro and those types of positions are being unwound at the present time.”

–With assistance from Anchalee Worrachate in London.

To contact the reporters on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net; Netty Ismail in Singapore at nismail3@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Nicholas Reynolds, Naoto Hosoda