The euro swung sharply against the dollar Wednesday as traders monitored a summit of European leaders aimed at easing the debt crisis there. The Japanese yen fell to a record low against the dollar as its relative stability continued to attract traders.
The euro touched a six-week high against the dollar early in the day, then plunged around 9:30 a.m. on reports of a deadlock in Europe. European leaders and bankers appear unable to agree on the amount of Greek debt that banks should forgive.
French and German banks hold billions in Greek debt and could face massive losses. Greece can't afford to repay all of its debt.
The euro recovered some of its losses in the late morning and afternoon as it appeared European authorities were inching closer to a deal.
The euro fell to $1.3908 at 3 p.m. Eastern time from $1.3931 late Tuesday. It rose to $1.3975 early Wednesday, the highest since Sept. 8. It fell to a daily low of $1.3798 around 11 a.m., after the morning's discouraging headlines.
The euro has risen sharply since hitting a recent low of $1.3172 on Oct. 4. Traders appear more hopeful that the problems in Greece won't spread to other nations and cause a disastrous financial crisis.
A credit crisis would slow lending and could plunge Europe into a recession. Traders would have trouble profiting from European stocks and bonds, making the euro less attractive.
Uncertainty about the U.S. economy helped push the dollar to a record low against the yen for a second straight day. The dollar fell to 75.69 yen at 6 a.m.
Both the dollar and the yen typically serve as safe, stable investments during periods of uncertainty. The yen has gained favor against the dollar in part because traders fear that the Federal Reserve will take more action to bring down long-term interest rates.
Lower rates tend to make a currency less attractive to traders by lowering the returns on fixed-income investments such as government debt.
The dollar edged up to 76.2 yen from 75.92 late Tuesday.
In other trading, the British pound fell to $1.5965 from $1.6019. The dollar rose to 0.8817 Swiss franc from 0.8780.
The dollar fell sharply against the Canadian dollar, to 1.006 Canadian dollar from 1.0137. It fell to 6.5267 Swedish krona from 6.5483.