The euro was volatile against the dollar on Friday after EU politicians announced that a deal had been reached on greater fiscal union in the eurozone, although it lacked the support of all members.
The single currency dipped 0.3 per cent on the news, then bounced back to rise 0.6 per cent against the dollar in mid-morning trading in London, at $1.3422.
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Traders attributed the bounce to stops being triggered after the euro fell below $1.33 earlier in the day, as well as purchases of peripheral sovereign debt from the European Central Bank under its Securities Markets Programme.
Currency analysts said they expected a particularly volatile day in the markets, with low levels of liquidity and uncertainty over further announcements from the summit. Analysts at Morgan Stanley said the euro and commodity currencies were likely to be particularly vulnerable.
The pound rose against the dollar but fell against the euro as David Cameron, UK prime minister, said the UK would not be part of any new treaty in the eurozone. Sterling rose 0.3 per cent to $1.5670, while the euro rose 0.3 per cent to £0.8559.
The Swiss franc rose against the euro and the dollar, which fell 0.7 per cent to SFr0.9196. The single currency fell 0.2 per cent to SFr1.2235.
Commodity currencies were also volatile on Friday. The Australian and New Zealand dollars sold off after the EU announcement, with the Australian dollar hitting a low of $1.0044 against the US dollar before clawing back losses to remain flat on the day.
The Canadian dollar was slightly higher against the dollar at $1.0209, a rise of 0.1 per cent.
Scandinavian currencies were also stronger, with the Swedish krona and the Norwegian krone each rising 0.8 per cent against the dollar to SKr6.7290 and NKr5.7382 respectively.
