Euro sees historic reversal—here's why

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The euro's historic reversal against the dollar Monday is just a product of the initial panic among short-term investors about a possible Greek exit from the euro zone dissipating, Marc Chandler of Brown Brothers Harriman told CNBC. (Tweet This)

"A lot of the medium- and long-term investors are not going to do anything this week," the firm's global head of currency strategy said.

The euro zone common currency dropped as much as 1.89 percent to $1.095 overnight as investors digested news that the Greek government, led by Prime Minister Alexis Tsipras, said it would close the country's banks and hold a referendum in order to evaluate its creditors' proposals on solving the country's debt.

Read More Greece crisis deepens: Banks closed, pleas for help

In late-morning Monday trading, the euro/dollar pair briefly edged into positive territory before dipping back in the red. However, the euro also turned positive in the afternoon, extending gains at about $1.1251, or approximately 0.7 percent.

This is the biggest reversal ever for the common currency. Previously, the largest turnaround happened Jan. 23, 2009, when the euro fell as much as 1.70 percent, but then eked out a gain of 0.04 percent.

Chandler said, however, investors should not change their positions because of the referendum, as the market's fundamentals remain unchanged. "If you were looking for a Fed rate hike in September, continue to do so," he said.

He also added that, "A lot of people are viewing the referendum as a negotiating chip, not as a Greek exit from the [euro zone]."

Read MoreGreece: Uncertainty reigns after referendum gamble

Francis Yared, a strategist at Deutsche Bank, said in a note that the markets were prepared for the euro's move to the downside, thus limiting its long-term impact. "Relative to the week before, there has been a clear pricing out of Greek risks as the market grew more optimistic for a positive resolution. This, therefore, sets the stage for an initial risk-off reaction."

Nevertheless Yared added that, "Longer term, the events in Greece are a stark reminder that the current euro zone architecture is vulnerable to domestic politics. This in itself will justify some structural risk premium unless there is an institutional change or further economic convergence."