Markets have been spooked rather than panicked by the latest stage of the unravelling crisis in Greece.
Shares have fallen across Europe and the euro has hit its lowest level against sterling since 2007 as markets digest Greece’s introduction of capital controls blocking most money movements and the temporary shuttering of banks ahead of Sunday’s referendum.
Low risk bonds, including German, US and British government debt shot up in value as money was shifted into so called safe haven assets.
Confidence in their long term value pushed the dollar and the UK pound higher too.
But, away from Greece itself the self off in risky asset is so far relatively muted. Voters in Greece will be asked on Sunday whether to accept further bailout conditions for new European loans, or
Borrowing costs for a range of countries including Slovenia, Spain and Italy are sharply higher today but remain modest in historical terms, and well below last year’s rates.
Irish government borrowing costs, around 1.6pc a year to borrow for 10 years, barely moved – neither falling with the so called safe haven nations or increasingly with the rest of the so called Europe periphery.
Even the euro proved relatively resilient, boosted in part by intervention from the Swiss National Bank to support the single currency,
Greece looks virtually certain to miss a debt repayment to the IMF on Tuesday as the country's European partners shut the door on extending a credit lifeline after Athens announced a referendum on bailout terms.
But though the euro initially fell sharply in response, to as low as $1.0956 in European trade it was trading within recent ranges at $1.1112 as investors displayed a "complete lack of panic" over Europe's single currency, as Rabobank senior currency strategist Jane Foley put it.
"If people were questioning the whole coherence of the EMU, then they would want to get out of the euro. The euro's resilience suggests that people don't believe that the EMU will fall apart, even if Greece exits," Foley said, highlighting a move into safe-haven German Bund yields as evidence that investors are not pulling out of European assets completely.
Foley also said that worries over Greece made the euro less attractive as a funding currency for carry trades, in which investors borrow the euro and then sell it to buy higher-yielding currencies, and that therefore was lifting it.
Despite the relative calm, the cost of hedging against sharp swings in the euro against the dollar over the next week, which covers the period of Greece's referendum, jumped to its highest in over five years, reflecting concern that volatility could escalate.
Given relatively low liquidity as investors cut their euro positions, Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo, said the euro's drop so far did not suggest any panic selling in the foreign exchange market.
"It's been surprisingly orderly, as the reaction was expected because of the headlines over the weekend. It could have been much uglier," he said.
(Additional reporting Reuters)