LONDON—The dollar fell against a range of currencies in volatile European trading Thursday, as hopes rose that euro-zone leaders would solve the region's debt crisis at a pivotal weekend summit, despite an absence of news.
Investors bought the euro, which had sagged against the dollar in Asian and early European trading, after draft guidelines for the European Financial Stability Facility showed that the bailout fund will be able to buy sovereign debt directly from countries issuing new bonds or on the open market.
The euro traded recently at $1.3814, compared with $1.3760 late Wednesday in New York. The dollar was at ¥76.77 from ¥76.81, while the euro was at ¥106.16 compared with ¥105.70. The pound edged up to $1.5783 from $1.5774. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, slid to 76.822 from 77.085.
The dollar also sank against the Australian, New Zealand and Canadian dollars, as investors were encouraged to take buy commodity-linked currencies, while European shares pared their losses.
"Market activity is headline-driven this week. There is constant pricing and repricing ahead of the EU summit this weekend. Good news boosts the euro and pessimism pushes it back down," said Lefteris Farmakis, a foreign-exchange strategist at Nomura. "While we don't think much will be resolved at the summit, historically it is very unwise to predict how these things will pan out."
Sterling received an additional fillip from U.K. economic data, which showed retail sales rose by a higher-than-expected 0.6% in September.
The Turkish lira remained under pressure against the dollar, despite efforts by the Turkish central bank this week to hold large daily foreign-exchange auctions and intervene directly in the market to stem weakness in the currency. The lira's continued weakness prompted some talk that it might resort to raising interest rates later Thursday.
"We continue to assume that the central bank's interest rate policy will continue to focus on economic growth rather than the lira," said Commerzbank analyst Thu Lan Nguyen, playing down the speculation. "As a result today's rate decision might disappoint some market participants."
