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By Bloomberg

Euro volatility is reaching levels unseen in three years as currency traders await the outcome of Greece’s debt talks.

A gauge that tracks the euro against major peers fell to the lowest in a week after the European Central Bank said Wednesday it will no longer waive collateral rules for Greek government debt. The South Korean won retreated against all its major counterparts, while the Aussie gained after China joined global central banks in expanding stimulus.

“Any risk of Greece being in more trouble is going to be a negative for the euro,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “It’s very fluid, so that’s probably going to drive some volatility in the next few weeks or even months.”

Euro price swings versus the dollar climbed to 12.4 percent as of 1:39 p.m. in Tokyo, the highest since December 2011, one- month historical volatility showed. Expectations for future gyrations in the currency pair surged as much as 1.8 percentage points to 13.2 percent, approaching the Jan. 16 high of 14.1 percent, also a level unseen since December 2011.

The euro was little changed at $1.1356, after dropping 1.2 percent Wednesday. The single currency bought 133.18 yen from 133.06 in New York. Australia’s dollar gained 0.4 percent to 77.81 U.S. cents.

ECB Move

A measure that compares the euro against nine other developed-market currencies tracked by Bloomberg Correlation- Weighted Indexes fell 0.1 percent to 96.72, after earlier reaching 96.55, the lowest since Jan. 29.

The euro has slumped about 15 percent against the dollar during the past six months as the ECB embarked on a government bond-buying program this year to combat growing risks of deflation and a slowing economy. Greek government debt currently pledged as collateral under ECB refinancing operations will no longer be eligible as of Feb. 11 when the current operation matures, the ECB said.

“The Governing Council of the ECB today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic,” the Frankfurt-based central bank said in an e-mailed statement. The council’s “decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing Eurosystem rules.”

‘Intense Negotiations’

Greek Finance Minister Yanis Varoufakis met ECB President Mario Draghi on Wednesday and said it will cost Germany less to lighten Greece’s debt load now than to force compliance with conditions of its bailout, according to an interview published in Die Zeit newspaper.

Greece may run out of cash by the end of this month unless a 15 billion-euro ($17 billion) limit on short-term borrowing is raised, said a person familiar with its financial position.

“Close attention is warranted; This intense negotiations will likely continue through this month,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “In the end, I believe there will be some compromise but in the next two to three weeks leading up to that, momentum may mount to push the euro down to $1.1.”

The Aussie rebounded from a two-day slide against the dollar as investors viewed China’s decision to ease policy as bolstering Australia’s economy. China is Australia’s biggest trading partner.

The People’s Bank of China cut the amount of cash lenders must set aside as reserves to 19.5 percent from 20 percent, effective Thursday.

‘Further Easing’

“China is helping the Aussie stabilize at the moment,” said Stan Shamu, a Melbourne-based market strategist at IG Ltd. “There’s still talk of further easing” by the PBOC, he said.

The won halted a two-day gain as the ECB’s decision sapped risk appetite, and amid speculation the Bank of Korea would follow China and more than a dozen other central banks globally who have added stimulus this year.

Eleven of 22 economists surveyed by Bloomberg News predict the BOK will lower its benchmark rate from 2 percent this quarter after last cutting it in October.

The South Korean currency weakened 0.3 percent to 1,088.12 per dollar after rallying 1.2 percent Wednesday, the most since 2013, according to prices compiled by Bloomberg.