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By Bloomberg

The euro advanced, climbing the most against the yen in more than two years, after Greece proposed a package of spending cuts and tax increases aimed at securing a bailout and avoiding being pushed out of the currency union.

After months of abortive talks, which sent euro-dollar volatility soaring to the highest since 2012, Greece offered to meet most of the demands of its creditors in exchange for a 53.5 billion-euro ($60 billion) rescue package. The yen weakened at least 0.8 percent against all of its major peers as the news from Europe and a rally in Chinese stocks damped demand for haven assets.

“The market is reading it about right,” Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG, said in an interview on Bloomberg Television. “The probability of a deal now has risen extraordinarily over the past 24 hours.”

The euro surged 2.2 percent to 136.80 yen as of 8:02 a.m. New York time, and rose as much as 2.5 percent earlier, the biggest gain since April 2013. The yen weakened 0.8 percent to 122.29 per dollar. Europe’s single currency climbed 1.4 percent to $1.1186.

“It’s a capitulation on the Greeks’ part,” said Steve Barrow, head of Group-of-10 strategy at Standard Bank in London. “We’ll get a euro bounce today. Maybe we can consolidate in the $1.10 to $1.15 range.”

Greek Prime Minister Alexis Tsipras will seek his parliament’s support for the proposals on Friday, and the plan will also be discussed at a summit of European Union leaders on Sunday -- the day they’ve set as a deadline for an agreement.

Unwinding Yen

“The Greek proposal gives the impression that the government is compromising,” said Yuji Saito, executive director of foreign exchange at Credit Agricole SA in Tokyo. “Euro-yen is rising as investors unwind yen-buying positions that accompanied risk aversion.”

The yen fell from near its strongest level in seven weeks versus the dollar as the Shanghai Composite Index of stocks extended its two-day rally to 11 percent. The gauge gained 4.5 percent Friday, having tumbled more than 30 percent from its June peak.

Three-month implied volatility, a measure of anticipated price swings in the euro-dollar exchange rate based on options, fell to 11.2 percent, the lowest end-of-day level since June 24. It climbed to 12.4 percent on Wednesday, the highest since June 2012.

“If we’d gone into Grexit, we could have seen some substantial volatility next week,” Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said in an interview on Bloomberg Television’s “Countdown” with Anna Edwards.