The euro's advance against the dollar lost momentum on Friday after a rally this week as the market focus shifted to upcoming economic data, with Greece looking set to secure emergency funds and avert imminent default. The single currency, however, was supported by buying from Asian central banks after early rounds of profit-taking had pushed it down to an Asian session low of $1.4467, Tokyo bank dealers said.
Investors broadly covered short positions in the dollar and locked in profits on outperforming commodity currencies such as the Australian and New Zealand dollars after China's purchasing managers' index came in slightly below expectations at 50.9. The euro was also well-supported against the yen and the Aussie with traders saying the market was starting to rebuild longs ahead of Thursday's European Central Bank monetary policy meeting.
Investors will focus on a news conference by ECB President Jean-Claude Trichet following the meeting, during which it is expected to raise interest rates again, with data earlier this week showing inflation in June having stabilised well above the bank's target.
The euro traded at $1.4514, up 0.1 percent from $1.4504 late in New York, where it peaked near $1.4539, a level not seen since June 10. It has rallied some 3 percent from Monday's trough around $1.4100 in a dramatic week that saw market sentiment swing from worries that Greece would go bankrupt to relief that it would get through the crisis, against a backdrop of violent protests and general strikes over austerity steps. Immediate resistance for the common currency is seen at the overnight high, with the 55-day moving average of $1.4404 likely to provide support.
Indeed, the dollar index , which tracks the greenback's performance against a basket of major currencies, languished near three-week lows. It last stood at 74.34, after falling as low as 74.255. Against the yen, however, the dollar edged higher after solid bids by investment trust funds around 80.50 yen. Retail investors were pouring their summer bonuses into foreign investment trust funds, drawing yen-selling demand, says Tsutomu Soma, a senior manager at Okasan Securities.
The Aussie fell as low as $1.0673 as stop-loss orders were triggered around $1.0690 shortly after the Chinese PMI figures came out. It has recouped most of its losses towards the end of the session, having found strong support above its 55-day moving average of $1.0661.
Commodity currencies have been among the star performers this week. The Australian dollar rallied some 3 percent from Monday's trough to a high of $1.0750. It has since given back a bit of ground to trade at $1.0694. Sterling was again the biggest loser, hovering close 15-month lows on the euro and rebounding only mildly from a 26-year trough on the Aussie, as analysts slash British growth forecasts after a run of dismal data.