The euro fell from an early two-week high against the US dollar on Friday as investors grew wary about the outcome of Greek debt negotiations ahead of the weekend despite growing expectations of a deal.
Last week the euro gained more than two per cent, putting it on track for the biggest weekly advance since mid-October after Thursday's solid bond auctions in Spain and France whetted investors' risk appetite.
On Friday, talks between the government and banks broke up without a resolution, but are expected to continue.
After months of meetings, a deal on banks writing down a huge chunk of the Greek debt they hold could be a major step toward stabilising the Eurozone.
The euro hit a two-week high at $1.2986 on Friday before sliding to $1.2926.
Earlier in the day traders had bought up the single European currency as markets continued to be positive after France and Spain held successful bond auctions.
Analysts said the euro could stay supported in the short term despite Friday's drop as investors await the outcome on the Greek debt.
"Over the past few days, the market has taken a more optimistic view of events. The hopes of a Greek agreement have helped, as has better economic data and a more positive, maybe even coordinated, spin by recent European Central Bank speakers," said Ken Dickson investment director at Standard Life Investments in Edinburgh, which has assets under management of $233 billion (Dh855.7 billion).
The euro shed 0.3 per cent to $1.2927, falling from a peak of $1.2986, according to Reuters data, when it stopped just shy of the key $1.30 level. But it remained well above the previous week's 17-month low. A positive outcome to the Greek talks is expected to boost the euro, although investors would remain wary about the risks of the region's debt crisis deteriorating further. Any negative news could see investors re-establish bearish bets.