The euro reversed losses on Monday that had driven it to a four-month low against the dollar, though gains were expected to be short-lived amid worries about the ability of indebted euro zone countries to raise funds and speculation that Portugal will need a bailout.
The recovery in the euro, which fell as low as $1.2860 on trading platform EBS, was partly helped by gains versus the Swiss franc on speculation the Swiss government may take measures to rein in currency strength. The euro last traded up 0.3 percent at $1.2953, though it remained down about 3.3 percent in the first six trading sessions this year. Traders reported option barriers at $1.2850 and sovereign buy orders just above that level. Against the Swiss franc, the euro rose 0.3 percent to 1.2526 francs. The dollar slipped 0.4 percent to 82.72 yen.