NEW YORK: The euro rose against the dollar Thursday, boosted by hopes that US politicians will find a compromise to avoid the year-end "fiscal cliff" that could jolt the economy into recession.
With investors' appetite for risk whetted, the euro bought $1.2978 at 2200 GMT, up from $1.2939 at the same time Wednesday.
The European unit rose against the Japanese currency, to 106.58 yen from 106.14 yen late Wednesday.
The dollar edged up to 82.10 yen from 82.03 yen.
"Investors want to believe that the full brunt of the US fiscal cliff is going to be somehow averted," said CurrencyThoughts.com.
David Solin at Foreign Exchange Analytics noted that the euro had softened somewhat from earlier highs, citing "some mixed comments from US officials in regards to these negotiations on the fiscal cliff."
US Treasury Secretary Timothy Geithner met with congressional leaders of the Democratic and Republican parties seeking progress on a deal.
Republican speaker of the House of Representatives John Boehner said, after meeting with Geithner, there had been "no substantive progress" in averting drastic tax hikes and spending cuts that take effect in January.
Solin said the risk market remained quite strong as investors believed that lawmakers would forge a longer-term debt-reduction budget to avoid the fiscal cliff.
"It doesn't make a lot of sense to me, they might be underestimating" the situation, he added.
The European currency also found support from the European Commission approving a plan to restructure some of Spain's banks Wednesday, said Nick Bennenbroek at Wells Fargo Bank.
The EC cleared the restructuring of four Spanish banks -- Bankia, Novagalicia, CatalunyaCaixa and Banco de Valencia -- paving the way for Spain to receive 37 billion euros ($48 billion) in aid next month.
The dollar fell against the Swiss currency, fetching 0.9274 francs, compared with 0.9300 late Wednesday.
Meanwhile, the British pound rose to $1.6043 from $1.6013.
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