The euro edged higher on Wednesday, holding gains made the previous day as the market braced for a European Union summit while traders sought clarity on whether Greece may get help in tackling its fiscal problems. The euro jumped after traders cited a media report that Germany was said to be considering aid for Greece beyond loan guarantees.
But trimmed gains on comments from France that there was no euro zone agreement on an aid package at the moment. German government coalition sources subsequently said bilateral financial aid could be provided for Greece, pushing the single European currency to the day's high versus the US dollar.
Ultimately, the euro made limited headway amid uncertainty regarding the outcome of Thursday's meeting. Concerns about the fiscal positions of several eurozone countries were also making investors wary of taking big positions. "The big focus is on what comes out of Thursday's meeting and whether there will be any agreement is still up for debate. The euro has seen relatively little movement on this morning's news and I still think the topside will take some cracking", said RBS' Paul Robson.
By 1210 GMT, the euro was steady on the day at $1.3780, having hit a session high of $1.3815, according to Reuters data. It had climbed a full percent on Tuesday and pulled further away from an 8 1/2-month trough around $1.3580 hit last week.
Speculation about possible assistance swirled, with France's Le Monde newspaper saying that a German-led plan for Greece should be finalised on Wednesday after talks with the European Central Bank. "The market is toeing and froing on the prospect of any sort of package to help Greece," said Adam Cole, global head of currency strategy at RBC in London.
Pressure on the euro has eased slightly this week after it took a pounding as gaping deficits not only in Greece but in Portugal and Spain highlighted the dismal financial positions of some euro zone members, undermining stability in the 16-country bloc. The euro was down slightly at 123.60 yen as traders took a breather after pushing the single currency up roughly 1.5 percent on Tuesday, its biggest one-day gain since October 2009.
The euro was underpinned on Wednesday as the government bond yield spreads between Greece and Germany - considered by far the safest of euro zone debt - continued to narrow, suggesting that jitters about Greece may be fading slightly.