The euro rose to a three-week high against the dollar on Friday and was headed for its second week of gains on optimism that Greece’s lenders were nearing an agreement to tackle the country’s debt pile.
But the single currency’s gains could be tested by data on German business morale due at 0900 GMT. The Ifo business climate index, a barometer of economic health in Europe’s largest economy, is seen slipping to 99.5 in November from 100.0 last month.
“The market is getting a bit confident that a Greek deal will be struck. This will remove one of the near-term uncertainties in the euro zone and some of the short euro bets will be squeezed as a result. But I do not see the euro rising much beyond $1.30,» RBS currency strategist Paul Robson said.
“While the short-term risks stemming from Greece wane, the medium-term risks in the euro zone from weaker growth and missed debt targets remain and that will see the euro struggle.”
The euro rose past reported option barriers at $1.2900 to hit $1.2908 on trading platform EBS, up 0.2 percent on the day. Stop-loss buy orders are cited at $1.2920.
It has gained nearly 1.5 percent against the dollar in the past two weeks as yields on Greek bonds fell on expectations that euro zone ministers should be able to sign off on another tranche of aid for Greece on Monday.
The euro slipped from a seven-month high against the yen . It eased to 106 yen, down 0.2 percent on the day, and off its peak of 106.585 struck on Thursday.
The yen earned a respite from its steep losses made in the past two weeks. It has been under pressure on expectations of more aggressive monetary easing in Japan.
The dollar eased 0.3 percent to 82.17 yen, pulling away from Thursday’s 7-1/2-month high of 82.84 yen, its strongest level since early April.