The euro rose against the dollar on Tuesday as it recovered from the previous day's selloff, but debt problems in the eurozone continued to weigh on the single currency, keeping it vulnerable to more losses. The euro was up 0.5 percent at $1.4309, nudging up after stop-loss orders were triggered above $1.4250, while the Canadian dollar outperformed, jumping to a one-week high against the US dollar after strong Canadian inflation data.
The single currency recovered some of Monday's losses, when risky assets were hit by growing talk Greece will have to restructure its mountain of debt and by Standard & Poor's threat to cut the United States' AAA credit rating. But traders said the euro could encounter more selling ahead of the Easter holidays. It may also be hemmed in by options expiries due on Tuesday at $1.4200 and $1.4300.
"The European debt crisis is in the market's focus again, and people are concerned there is no lasting solution. Meanwhile, even negative news in the US isn't putting too much pressure on the dollar anymore," said Lutz Karpowitz, currency analyst at Commerzbank in Frankfurt. Earlier, comments from a German Finance Ministry official that a Greek debt restructuring was inevitable caused the euro to pare some early gains but it then rebounded. Athens has denied such a possibility.
Elsewhere, the Canadian dollar reversed its recent losses to hit a one-week high versus the greenback after data showed Canadian inflation shot to its highest since September 2008 and above the central bank's target range. The data will add pressure on the Bank of Canada to resume raising interest rates. The US dollar lost 0.7 percent to hit C$0.9574.
The euro has pulled back sharply after it was unable to hold onto a 15-month high above $1.45 hit earlier this month. Analysts said the possibility that a country which has received a debt bailout may still have to restructure its borrowing was likely to encourage more investors to exit long euro positions.
Analysts said investors were wary of holding bets in favour of the euro over the upcoming four-day Easter holiday weekend, adding that that the single currency could encounter more losses if those positions are closed out. The dollar slipped 0.4 percent on the day against a currency basket to 75.182. The US currency was flat at 82.61 yen.