The euro recovered against the dollar on Wednesday as investors reduced bearish bets on the single currency before Thursday's European Central Bank meeting, although gains may be capped by persistent fears about the region's debt problems. In early morning New York trading, the euro was up more than 1 percent at $1.3122, pulling away from Tuesday's 2-1/2-month low of $1.2969 and trading around its 200-day moving average at $1.3125.
The greenback slipped 0.5 percent versus a currency basket to 80.771, but stayed near a 2 1/2-month high hit on Tuesday as the currency, the most liquid and therefore considered safe, has benefited from the euro's problems. The safe-haven Swiss franc fell 1 percent versus the euro, which rose to 1.3176 francs. Analysts said if the ECB eases its policy stance or extends bond buying on Thursday this may help stabilise sentiment.