The euro strengthened against the U.S. dollar, which was on track on Tuesday to post its biggest one-day loss against the single currency since mid-March, on expectations that Greece would reach a deal with its creditors.
Greece's creditors are close to finishing a draft agreement to put to the leftist government in Athens, a source close to the talks said on Tuesday, injecting new momentum into long-running negotiations to release aid for the cash-strapped country.
Athens is close to running out of money and has threatened to default on an International Monetary Fund payment this week without a deal.
"It’s certainly my expectation that within the next two days you’re going to see a further reprieve granted for Greece, and the standoff will have ended," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
He said the euro would probably hit $1.15 in the wake of a Greek deal as more traders who had bet against the currency repurchase it to cover their short bets.