Euro rose across the board and pulled off 1-1/2-month lows against the US dollar and British pound on Friday on news EU leaders reassured the holders of outstanding bonds that they would not be forced to take losses. The day's gains, however, did not prevent the single currency from heading for weekly losses versus the majors as investors are still worried that Ireland may default on its bonds.

The yield spread of Irish government bonds over comparable German papers rose to record levels on Thursday, and despite a fall in the gap on Friday, uncertainty over a bailout package that Ireland may ask for shortly still shadows the common currency.

Angela Merkel, German chancellor, who faces elections next year in states where a quarter of the nation's population will march to polling booths, says her intention is to bring fiscal discipline to the euro area and prevent German taxpayer's money going for any bailouts.

Investors do not expect any drastic change in the German policy to help the single currency come back on track. The euro is heading for its third straight weekly fall against the British pound, also due to a higher-than-expected inflation projection by the Bank of England that triggered a bullish wave on the sterling earlier in the week.

At around 1345 GMT, the euro was at 1.3722 against the dollar, from its previous close of 1.3665 and moving off an intra-day low of 1.3572, where it was at its lowest since September 30. However, the euro stood 2.2 percent down from last week's close and 3.9 percent weaker than 1.428, a 10-month high it posted on November 4.

Against the sterling, the single currency was at 0.8512, up from Thursday's close of 0.8475 and off day's low of 0.8448, at which level the euro was at its weakest since September 21. The EUR/GBP pair is, however, now nearly 1.8 percent down in the week and 4.9 percent down from a 7-month high of 0.8940 touched on October 22.

The euro was at 112.89 versus the Japanese yen, up from its previous close of 112.71 and pulling off a near 2-month low of 111.03 hit earlier in the day. At its current level, the common currency is 1.1 percent down from last Friday.