Euro Rises to Two-Week High on Bets Greek Default May Contain Debt Crisis

The euro advanced to the highest in two weeks against the dollar as officials said European governments may expand the region’s bailout fund and accept a temporary Greek default, reducing contagion concern.

The dollar briefly pared its drop versus the yen on a New York Times alert that President Barack Obama and House Speaker John Boehner have reached a budget accord, which White House spokesman Jay Carney discounted. The Swiss franc fell against most of its major counterparts as the prospects for an agreement at today’s summit in Brussels reduced demand for a refuge.

“Whatever it is and any imperfections that are in it, we’ve got a deal,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “The euro isn’t going to break apart this weekend, or anything like that. We’ve got a short-covering rally that removes the break-up premium from the euro.” A short is a bet a currency may decline.

The euro gained 1.1 percent to $1.4374 at 1:03 p.m. in New York, from $1.4215 yesterday, after touching $1.4402, the highest level since July 6. The euro climbed 0.9 percent to 112.94 yen, from 111.99. The dollar dropped 0.3 percent to 78.53 yen, from 78.78.

Carney said there has been “no deal” with House Republicans and the administration is continuing discussions with lawmakers. Boehner’s office also said there has been no agreement.