The euro erased losses on Monday as the shock of a failed negotiation on Sunday between Greece and its creditors faded and investors turned their focus toward a U.S. rate decision later in the week.
The euro zone finance minister's meeting on Thursday now takes on a greater role for potentially solving the impasse, which if not rectified could lead to a default by Greece on its debt obligations.
"There is no explanation for the euro's rise today. No talk of anything specific and everyone we are talking to is struggling to come up with a reasonable explanation. You come in on a bit weaker euro and we spend our session seeing retrace the move. It's been that way for the last ten days," said Bill Samela, co-head of global FX trading at Bank of New York Mellon in New York.
"So much misinformation is coming out of Europe, whether it is the ECB members or Greece, making it an extremely difficult environment to trade," he added.
Late on Monday a Greek government official denied a German newspaper report that there is a plan for Greece to impose capital controls if further debt talks fail to reach a solution. The euro did not move on the Greek knockdown of the report, which was seen as contributing to a brief euro sell-off before it resuming its upward advance on the greenback.
European Central Bank President Mario Draghi said on Monday the economy was recovering at a moderate pace and that a strong and credible agreement with Greece is in the interests of the euro area as a whole but the ball is in Greece's court.
Concerns that Greece could default and leave the euro zone prompted the first significant bid for safety in German Bunds in six weeks and lifted peripheral euro zone bond yield premiums to their highest in nearly seven months.
Reuters data showed that one-month euro/dollar implied volatility, a gauge of how sharp swings in the currency are likely to be, rose to a 3-1/2 year high of 14.305 percent. "As the quarter winds down we are kind of in a no-man's land, where choppy consolidative trade prevails," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.