The euro had gained in early trade after European leaders neared a deal over the weekend on bank recapitalization, and euro zone officials said France and Germany were close to agreement on how to use the European Financial Stability Facility to stave off contagion in the bond market.
As the New York session began, the euro surrendered gains but investors again reversed, expressing renewed optimism that concrete steps to resolve the crisis will be announced on Wednesday despite serious divisions on the size of the haircut private holders of Greek bonds will have to endure.
The dollar fell against the yen, trading close to the record low hit touched on Friday and leaving traders on alert for possible renewed intervention to stem strength in the Japanese currency.
"It seems there is a lot of optimism surrounding the next meeting and a narrowing down of what we could see," said David Song, currency analyst at DailyFX in New York.
The euro was last up 0.3 percent at $1.3933.
But any delay in releasing a convincing plan from Wednesday's summit, or even a delay in a statement from leaders of the euro zone economies, could cause the euro to fall, analysts said.
"I wouldn't go long on the euro right now. Event risk is still to the downside for the euro because the market is already priced for EU leaders to come up with a fairly big plan," said Richard Falkenhall, currency strategist at SEB in Stockholm.
Falkenhall added that the euro could easily rise, however, to around $1.41 on a positive summit outcome.
Such an outcome could prompt speculators to cover short euro positions.
TECH LEVELS
The euro stood well above its nine-month low plumbed this month and analysts said it was likely to stay supported at least until the conclusion of Wednesday's summit. Traders cited bids between $1.3780 and $1.3810, which they said may cap falls, while the euro has support at the 100-week moving average around $1.3660.
However, resistance stands at the 200-week moving average around the pivotal $1.4000 level.
Against the yen, the dollar was down 0.2 percent at 76.11 yen, not far above Friday's all-time low of 75.78 yen on electronic trading platform EBS.
Japanese Finance Minister Jun Azumi said on Monday Japan would take decisive action on excessive and speculative forex moves. He said that the greenback below 76 yen did not reflect economic fundamentals.
The growth-linked Australian dollar was up 0.9 percent at $1.0464, though it was off an earlier six-week high
of $1.0473.
China's vast manufacturing sector expanded moderately in October to snap three months of contraction, reflecting the resilience of robust domestic demand that is likely to soothe fears of an abrupt slowdown in the world's second-largest economy.
China is a large importer of Australian raw materials, particularly in the mining sector.
Copyright Reuters, 2011