Investing.com -- The euro extended its rally against the dollar on Monday to reach its highest level in three weeks, after a conciliatory move by Greece to ease tensions with its euro zone creditors provided a glimmer of hope for a breakthrough in the strained negotiations.
EUR/USD gained more than 0.1% to 1.096 in U.S. afternoon trading before falling back slightly to 1.0885 at the close. The euro is up more than 2% against its American counterpart since falling to 1.0737 on April 20.
Looking to rebound from a disastrous meeting with euro group ministers on Friday, Greece handed the day-to-day duties of working with the creditors to Euclid Tsakalotos, replacing Yanis Varoufakis with the Deputy Foreign Minister. Varoufakis will still be in charge of Greek negotiations with the International Monetary Fund, a Greek government official told reporters in an e-mail.
On Friday, euro zone ministers flung insults at the beleaguered Greek Finance Minister, accusing him of stalling progress in the talks. Greece has failed to unlock critical aid needed to stave off bankruptcy in spite of three months of negotiations with its euro zone creditors.
The move came after more than half of the respondents in a survey of money market traders by Reuters think there's a chance that Greece could remain in the euro zone even if it defaults on its sovereign debt. The price of Greek 2-Year bonds shot up, as yields on Monday fell by nearly 300 basis points to 23%.
In the U.S., economists are bracing for paltry first quarter GDP growth when the U.S. Department of Commerce releases its figures on Wednesday. Analysts from Morgan Stanley (NYSE:MS) and Barclays (LONDON:BARC) are projecting growth of 1.1%, far below a 2.2% increase at the end of 2014. The Federal Reserve of Atlanta is predicting an even bleaker outlook with its forecast of 0.2% growth.
In addition, the Federal Reserve is expected to keep its benchmark Federal Funds Rate at its current level of zero to 0.25% following the conclusion of the two-day Federal Open Market Committee (FOMC) meeting on Wednesday.
When the Fed released the minutes from its March meeting earlier this month, the committee ruled that an increase in the target range for the rate remained "unlikely at the April meeting." The FOMC appears uncertain on the timing of its first interest rate hike since 2009, amid a possible growing divide between Fed governors on a date for lift-off.
Although the Fed has not ruled out lift-off in June, analysts increasingly believe that a rate hike will not occur until the fall. The CME Group (NASDAQ:CME), for instance, isn't pricing a rate hike in its models until October.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.22 on Monday to 96.85, paring earlier losses.