The euro hit a two-week high against a soft dollar on Friday, supported by a rise in a key German business sentiment survey and hopes that cash-strapped Greece was making tentative progress toward securing fresh funding.
Helping sentiment toward the euro were comments from German Chancellor Angela Merkel who said on Thursday everything must be done to prevent Greece from running out of money. Still, expectations of a breakthrough at Friday's Eurogroup meeting were rather low.
Austrian Finance Minister Hans Joerg Schelling said on Friday there had been little progress in negotiations before the meeting, but ruled out a Greek exit from the euro zone.
The euro hit a high of $1.0898 in London trade, up 0.6 percent on the day and its highest level since April 7. It held firm at $1.0895 after a survey showed German business morale rose to its highest level in almost a year in April.
Ifo's business climate index, based on a monthly survey of about 7,000 firms, climbed to 108.6 in April from 107.9 in March. That was its highest reading since June 2014 and was slightly higher than a forecast of 108.4.
"Investors are cutting back short positions which is helping the euro climb," said Yujiro Goto, currency strategist at Nomura. "But in the medium term, we think the euro's downtrend is in tact, as the euro zone's recovery is not anywhere close to the growth we are seeing in the United States. We are still expecting the Federal Reserve to tighten in September."
The dollar .DXY was softer, though, weighed down by another batch of weak data, with the index down 0.5 percent at 96.782.
Among the U.S. data was an 11.4 percent slide in new home sales in March. That was the biggest monthly decline since July 2013 and followed three straight months of hefty gains. Traders said it was enough to give the market a fresh excuse to cut bullish dollar positions.
"Despite the softer data, we think the market is going to remain focused on risks of a more hawkish Fed message next week, and risks to U.S. front-end yields remain skewed to the upside from current low levels," analysts at BNP Paribas wrote in a note to clients.
The Federal Reserve holds a policy meeting on April 28 and 29 and there is certain to be much debate on when interest rates should start to rise.
Against the yen, the dollar was slightly lower at 119.34 yen, having pulled back from Thursday's high of 120.10 yen with some traders citing speculation that the Bank of Japan may start to taper its huge quantitative easing program.
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