The euro rose Tuesday as investors anticipated a political resolution for Greece that could help the indebted country get the funds it needs to avoid default.
Without a 12 billion euro ($17 billion) bailout loan, many investors believe Greece could default as soon as next month, wounding the European economy and banks that hold Greek bonds.
In late trading in New York, the euro rose to $1.4416 from $1.4305. The deepening debt crisis had driven the euro from a peak above $1.49 in April to just below $1.40 in late May.
The euro has been extremely volatile this month because of uncertainty about whether Greece will get the funds it needs to avoid a default.
The Greek Parliament is holding a confidence vote later on Tuesday. If Parliamentary support for the new Greek cabinet goes through, analysts say it will be easier for the government to pass key spending cuts. European officials have demanded these "austerity measures" before they release billions in emergency loans.
Investors expect that the Greek government will get the help it needs, driving up the euro in Tuesday trading, said BMO Capital Markets currency strategist Andrew Busch.
The austerity measures are also needed for Greece to get a second bailout beyond the 110 billion euros ($157 billion) deal agreed to last year.
Many economists say another aid package is necessary because Greece could run out of money next year despite the loans from its original bailout.
In other trading Tuesday, the dollar was broadly weaker ahead of a press conference by Federal Reserve Chairman Ben Bernanke Wednesday.
Investors will be on alert for any hint that the Fed might start up a new program to support the economy after its program to drive down interest rates, known as "quantitative easing," ends this month.
Lower interest rates tend to hurt demand for a currency when investors feel confident about increasing global economic growth.
The U.S. currency fell to 80.13 Japanese yen from 80.32 yen, while the British pound rose to $1.6246 from $1.6183. The dollar dropped to 0.8406 Swiss franc from 0.8465 Swiss franc and slid to 97.15 Canadian cents from 97.96 Canadian cents.