The euro fell on Wednesday as investors pared long positions after a three-day advance against the dollar sparked by optimism Greece's lenders will allocate the funds to avoid default on its debt. Earlier, the euro strengthened for the fourth straight session but that gave way to the squaring of positions for month and quarter end.
Month-end two-way flows dominated euro price action, with US corporations and speculators selling the single currency as central banks bought it, a trader said. "People are probably a little bit long (the euro) and squaring up ahead of quarter end and Jewish holidays," said Lane Newman, director of foreign exchange trading at ING Capital Markets in New York.
In late afternoon New York trade, the euro was down 0.3 percent at $1.35437 on electronic trading platform EBS, off a one-week high of $1.36909 touched in the overseas session in which a US investment bank was cited as a large buyer. The single currency has gained 0.5 percent in the last four sessions, but with a 5.8 percent slide month to date, the year-to-date gain is only 1.3 percent. Greece remains a focus for investors.
EU and IMF inspectors return to Greece on Thursday to decide whether Athens has done enough to secure a new batch of aid vital to avoid bankruptcy. Germany suggested a new bailout may have to be renegotiated. Finland on Wednesday voted to grant additional powers to the eurozone bailout fund, giving support to the euro. The proposal, which eurozone leaders agreed to in July, needs to be approved by the parliaments of all the eurozone nations.
"Markets remain intensely focused on European developments, where only slow and tentative progress in addressing the region's debt crisis is being made," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. Fears of a Greek default and its impact on Europe's banking system are largely behind the euro's September slide. Talk of proposals to leverage up the region's 440 billion euro rescue fund - the European Financial Stability Facility - had buoyed demand for riskier assets this week, though investors are still cautious about pushing the euro too high. The dollar fell 0.3 percent to 76.568 yen, within a yen of the record low of 75.941 hit in August on trading platform EBS and keeping investors alert for Japanese intervention to weaken the yen.