Euro rises in New York

The euro traded in a narrow range after hitting a new two-month high against the dollar on Thursday after Greek leaders agreed to a deal on reforms needed to avoid a messy default and the European Central Bank chief flagged tentative economic improvement in the eurozone. Greece's deal removed an important obstacle for the euro, which had been trading narrowly as investors placed bets based on headlines.
With the overhang of Greece out of the way, the euro's strength could prove to be temporary, with the focus likely shifting to larger debt-burdened countries, such as Italy and Spain. Greek political leaders clinched a long-stalled deal on reforms and austerity measures to secure a second international bailout and avoid a chaotic default, hours before the country's financial backers began meeting in Brussels.
"The euro will likely see some more gains in the next few days, largely due to people taking profits on short euro positions," said Chris Fernandes, vice president, senior foreign exchange advisor for the capital markets division of Bank of the West. The ECB's second three-year liquidity operation, or LTRO, is on February 29. The central bank funnelled banks 489 billion euros at a first three-year ultra-cheap loan operation in December, a measure that had gone a long way to calm financial market turmoil.
In late afternoon New York trade, the euro was up 0.2 percent at $1.3284 after earlier hitting a two-month high of $1.3321. The euro also rallied against the yen, hitting a two-month high of 103.28 yen. The dollar last traded 0.9 percent higher at 77.00 yen. Despite fears about Europe's debt crisis, the euro ended 2011 down just 3.13 percent and has nearly recovered those losses so far in 2012. "What currency markets have been telling us all along is that the dire language we heard about a collapse of the euro" was exaggerated, said Jonathan Lewis, chief investment officer at Samson Capital Advisors, with $7.4 billion in assets.