With a possible Greek debt deal in the offing, it is only a matter of time till the dollar rebounds and resumes its position against the euro. Optimism over a possible detente with Greek creditors is shifting the focus back to the Fed and its implementation of an interest rate increase sooner rather than later and a stronger dollar is certain to follow.
European equity markets were sharply higher Monday with the euro trading at about $1.13.
"Our sense is FX markets are just waiting for Greece to be resolved so they can go back to watching the fundamentals they prefer to watch—what happens with the Fed outlook ... rather than trying to second guess Greek political headlines, which is difficult for FX," said Vassili Serebriakov, strategist at BNP Paribas.
Asian stocks also rose with the MSCI Asia Pacific Index gaining 0.1 percent to 148.71 as of 9:00 a.m. in Tokyo and settling higher than it has in the last two months.
48 Hour Deadline
Greek Prime Minister Alexis Tsipras presented new austerity proposals Monday and European leaders gave Athens 48 hours to offer a final offer that would satisfy creditors and bring to an end the five-month stalemate.
“They’ve got a short-term resolution,” said Mark Lister, Wellington-based head of private wealth research at Craigs Investment Partners Ltd. “We head for the edge, all the brinkmanship plays out, then there’s a deal at the last minute and there’s a relief rally. Then we do it all again for the next deadline. That will continue to be the way things work until you hit breaking point.”