On Monday, the single currency, euro, climbed to a more than one-week high against the United States dollar after an orderly auction of Greek default insurance supported views that threat posed by Greece to the euro zone has diminished.
The single currency also gained against the Japanese yen to hit its strongest level in the almost five months since the Bank of Japan intervened to stem the currency's advance.
Bearish bets were unwounded by investors on the single currency who prefer to focus on a Greek credit default swap auction that set the payout for holders of CDS totaling about 3.2 billion euros.
The auction fixed a fair value price of 21.5 cents on the euro for Greek bonds, which means an owner of Greek CDS would be paid 78.5 cents on the euro.
"There has been an unwinding of short euro positions because the reasons for holding those positions have not materialized," said Douglas Borthwick, managing director of FX broker Faros Trading in Stamford, Connecticut. "The Greek CDS settled well and as expected so there has been no disorderly default in Greece. Plus, the euro/dollar basis swap continues to stabilize," he added.
The euro was up 0.5 percent at $1.32410 in late afternoon trading, after hitting a peak of $1.32659, its highest level since March 9. The euro was last at 110.363 yen against the yen, up 0.4 percent on the day, after rising as high as 110.580 yen, its highest level since late October.