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By Bloomberg

A plunge in euro-dollar volatility to the lowest level in a month suggests that it was the Federal Reserve, not Greece, that was spooking currency traders.

Expectations for price swings in the euro against the dollar have dropped from the highest since 2011 after Fed Chair Janet Yellen and her colleagues lowered longer-term projections for U.S. interest rates. The measure is dropping even as Greece faces a crunch meeting with euro-area finance ministers on Thursday as it seeks to avoid a default.

“The Fed has been a significant market focus,” said Jane Foley, a senior currency strategist at Rabobank International in London. “Perhaps people were positioned ahead of the Fed and were waiting for news. The market is not that hopeful that today’s meeting is going to bring that many changes to the status quo.”

One-month implied volatility in the euro-dollar pair dropped 25 basis points, or 0.25 percentage point, to 11.82 percent as of 9:25 a.m. London time, and touched 11.71 percent, the lowest since May 18. That’s down from a 3 1/2-year high of 14.44 percent reached on June 16.

Fed officials Wednesday maintained their forecast -- presented as dots -- for the benchmark interest rate to rise to 0.625 percent at the end of 2015, while lowering their outlooks for next year and the year after. The median estimate for the end of 2016 fell to 1.625 percent, compared with 1.875 percent forecast in March.

Greek Standoff

European finance ministers converge on Luxembourg with little hope for a deal, even with the meeting billed as a last chance to seal an agreement on as much as 7.2 billion euros ($8.2 billion) in bailout aid for Greece. Prime Minister Alexis Tsipras said he was ready to rebuff a bad deal come what may, with the current bailout expiring at the end of this month.

The euro rose 0.6 percent to $1.1408 on Thursday, after gaining 0.8 percent a day earlier.

“It’s curious recently that even when there are negative headlines on Greece, the euro doesn’t fall much,” said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “The market was probably looking for firmer hints of a September Fed rate hike, and it didn’t get any,” weakening the dollar, he said.