LONDON—The dollar was broadly weaker in European trading hours Tuesday as investors shifted funds back into the euro on signs that euro-zone leaders might be closing in on a credible crisis package ahead of tomorrow's summit.
But the dollar recovered slightly as currency traders took stock of the remaining hurdles in Europe, including disagreements over the size of writedowns on Greek debt, lingering tensions over Italy's reform program and a fragile economic backdrop.
Against the dollar, the euro reached a session high of $1.3950, with sterling hitting a six-week peak of 1.6012 and the Australian dollar hovering just below $1.05.
"Negotiations ahead of tomorrow's summit meeting are toughening up and so there has been a positive response from the market," said Ian Stannard, senior currency strategist at Morgan Stanley. "Euro gains are likely into the meeting but they will be limited as attention focuses back to the economic fundamentals."
In Asia, the People's Bank of China fixed the dollar's central parity rate against the yuan at an all-time high of 6.3425 yuan, while the Japanese yen briefly weakened to ¥76.31 against the dollar before drifting back toward Friday's record high in the face of lingering intervention worries.
The Turkish lira was broadly unmoved after Turkey's central bank said it will sell a relatively low maximum of $50 million at its daily foreign-exchange auction, ahead of a package of policy measures expected Wednesday.
Looking ahead, the Bank of Canada will make an interest rate decision at 9:00 a.m. ET. Some analysts expect the central bank will abandon its implied tightening bias and shift back to a neutral stance.
The euro was recently trading at $1.3949 against the dollar, compared with $1.3929 late Monday in New York. The dollar was at ¥76.16, compared with ¥76.10, while the euro was at ¥106.19 compared with ¥106.02. The pound was trading at $1.6021, compared with $1.5996 late Monday in New York.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 76.006 compared with 76.083 late Monday in New York.
