The euro jumped to a four-month high against the dollar on Monday, boosted by European leaders saying progress was being made in talks to take on debt jointly to help their economies.
The euro gained 0.2% to $1.1452 (EUR=), having risen to as high as $1.14555, its loftiest level since March, as EU leaders appeared within a whisker of breaking an impasse over a proposed 750 billion euro ($858.30 billion) recovery fund.
"The EU appears to be about to overcome a major hurdle. If they come to an agreement, the euro could look for a new trading range, possibly something like $1.14-$1.16, as opposed to the $1.11-$1.14 range it has been stuck for a while," said Kyosuke Suzuki, director of forex at Societe Generale (OTC:SCGLY).
"If they do come to an agreement, we should see a further rally in the euro," said Yujiro Goto, chief currency strategist at Nomura Securities.
But many market players also believe the euro will be supported even if the deal is not reached this time, as long as there remains the prospect of a deal on the stimulus.
The dollar index was flat at 95.948, with its advance kept in check as investor risk appetite continues to be strong, underpinned by bets of more stimulus not just from Europe but also the United States.
The British pound fell 0.2% to $1.2541 while the Australian dollar shed 0.10% to $0.6987 .
The Japanese yen eased 0.2% to 107.29 per dollar .
The offshore Chinese yuan held firm at 6.9853 per dollar , only a tad below last week's four-month peak of 6.9806.
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