NEW YORK: The euro hit a three-week high and headed for its best weekly performance against the US dollar since January as global risk appetite improved, but gains are seen limited given investors' belief that Greece's debt crisis is far from over.
The Greek parliament passed two crucial austerity bills this week, opening the way for international lenders to release a 12-billion-euro ($17 billion) loan installment that Athens urgently needs to stave off bankruptcy.
"Overall, it has been a positive week for global risk sentiment and a negative week for safe haven currencies such as the US dollar, yen and Swiss franc," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
The euro is on track to garner its first weekly gain against the dollar in a month.
Uncertainty remains about a longer-term solution for Greece. Euro-zone finance ministers are scheduled to hold preliminary talks this weekend on the second financing package for Greece for 2011-2014, which could total up to 120 billion euros ($175 billion).
The euro last traded at $1.4512, up 0.1 percent on the day. It had earlier risen to a three-week high of $1.4553 on trading platform EBS. At current rates it's up 2.3 percent this week, on pace for its biggest weekly advance since January.
Against the Swiss franc, the euro hit a one-month high of 1.2325 francs as investors cut back long positions in the safe-haven currency. It was last up 0.9 percent at 1.2306.
The dollar climbed 0.9 percent to 0.8476 franc, moving further away from an all-time low of 0.8276 set on EBS earlier in the week.
US financial markets will be closed on Monday for the Fourth of July holiday.
The market may start to rebuild long euro positions ahead of an expected interest-rate hike by the European Central Bank next Thursday, which would further move interest-rate differentials in favor of the euro.
Markets are expecting ECB President Jean-Claude Trichet to strike a hawkish tone after the meeting. However, they remain reluctant to price in further tightening.
"Feels like the euro is caught between reluctance to set up shorts before the ECB meeting, and the gentle reminder from the periphery PMI today that the last thing that is needed for a fragile periphery is a stronger euro," said Alan Ruskin, global head of G10 currency strategy at Deutsche Bank in New York.
A key survey on Friday showed the euro zone's manufacturing sector lost steam last month, while the region's weaker economies appear to be slipping back into recession.
Against the yen, the dollar rose 0.4 percent to 80.84 yen, hitting a session peak of 81.152 on EBS after data showed the pace of growth in US manufacturing picked up for the first time in four months in June.
Copyright Reuters, 2011
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