The European single currency firmed on Wednesday in cautious trading on the eve of a crucial summit where eurozone leaders will attempt to clinch a new bailout for debt-riddled Greece.
In late morning London deals, the single currency climbed to $1.4181 from $1.4150 late in New York on Tuesday. Against the yen, the dollar sank to 78.82 yen from 79.21 yen.
Leaders of the eurozone countries will hold an emergency summit on Thursday aimed at averting a default by Greece and preventing debt contagion in larger economies such as Italy and Spain.
"Foreign exchange markets remain sceptical about the outcome of tomorrow's summit," said Commerzbank analyst Antje Praefcke.
"Therefore, uncertainty and nervousness on the markets remain high, which in turn is reflected in volatilities and makes the euro vulnerable."
Eurozone leaders will meet in Brussels to try to overcome divisions and complete a second rescue for Greece.
German Chancellor Angela Merkel has warned that the talks may not produce a solution to the problem, which has markets worried that Athens may default on its 350-billion euro ($500 billion) debt and spark a chain reaction in Europe's weakest economies.
"On the backdrop of widely differing views among the parties there are doubts, shared by Merkel, whether a comprehensive and long-term solution will be found," said Praefcke.
"There is still the possibility that officials may yet come up with a big solution. We therefore expect to see rather directionless trade in thin markets today," she added.
France insisted on Wednesday that the eurozone was in harmony on the eve of the summit, playing down divisions over what burden banks should bear.
Germany wants the private banks that lend to Greece to agree to ease its debt burden. France insists such involvement must be voluntary so banks are not perceived to be writing off part of Greece's debt.
Other tools available to eurozone leaders include emergency rescue funds, taxes on banks and new loan agreements structured in such a way as to avoid an effective debt default.
Meanwhile, a European Central Bank (ECB) official indicated room for flexibility on conditions for a fresh bailout for Greece, raising expectations for a deal.
The ECB Governing Council member Ewald Nowotny told a broadcaster that "some proposals that deal with a very short-lived default situation... wouldn't really have major negative consequences," Dow Jones Newswires reported.
The bank's position has previously rejected any solution that would see Athens defaulting, even for a brief period.
On Wednesday, the euro changed hands at $1.4181 against $1.4150 on Tuesday, at 111.79 yen (112.11), £0.8798 (0.8771) and 1.1659 Swiss francs (1.1665).
The dollar stood at 78.82 yen (79.21) and 0.8221 Swiss francs (0.8240).
The pound was at $1.6118 (1.6132).
On the London Bullion Market, gold prices fell to $1,587.40 an ounce from $1,601 on Tuesday, when it had struck a record peak at $1,610.10 as investors had sought a safe haven from the eurozone crisis.