The euro edged up on Thursday after healthy results at Spanish and French bond auctions but investors cautiously awaited comments from European Central Bank President Jean-Claude Trichet.
The ECB earlier left interest rates unchanged, as expected, at 1.0 percent. The decision had little impact on the euro. Trichet was due to hold a news conference at 1230 GMT.
Market players were waiting to see whether the central bank extends lending support for banks, despite raising its growth forecasts, and will be watching to see how cautious Trichet is on the economic outlook.
Markets are a little cautious. If Trichet does sound concerned about the outlook then that would be negative for the euro, said Niels Christensen, currency strategist at Nordea in Copenhagen.
Earlier data confirmed the euro zone economy grew by 1.0 percent quarter-on-quarter between April and June.
Christensen said currency markets would also take their cue from developments on equity markets, while U.S. weekly jobless claims at 1230 GMT would be watched for signals on U.S. labor market health before payrolls data on Friday.
At 1147 GMT, the euro was up 0.1 percent at $1.2823, gaining support after Spain and France drew decent demand as they sold a combined 12.2 billion euros in bonds.
The next target for the euro was around $1.2873 -- a 38.2 percent Fibonacci retracement of its fall from its August peak of $1.3334 to its August low of $1.2588. The target after that would be $1.2923, touched on August 18.
The dollar index, a gauge of the greenback's performance against six major currencies, fell 0.2 percent at 82.372 .DXY after falling 0.8 percent on Wednesday, its biggest one-day fall in six weeks. Support was seen at the August 18 low of 81.912.
Upbeat U.S. and Chinese manufacturing data on Wednesday lured investors away from perceived safe-haven assets, lifting stocks, commodities and higher-yielding currencies.
With so much uncertainty, the market is very volatile and moves depend on the daily data flow, said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
SWEDISH CROWN GAINS
The Swedish crown rose to its highest in more than two years against the euro around 9.2955 after Sweden's central bank raised its key interest rate to 0.75 percent, as expected.
It also left its forecasts for future interest rates unchanged from July, helping to lift the crown as many in the market had expected them to lower the profile slightly. The Riksbank was also upbeat on the economy.
However, traders and analysts said investors took profit on the crown below 9.300 crowns per euro, which provided psychological support. By 1147 GMT, the euro had recovered to 9.3165 crowns, though it was still 0.2 percent lower on the day.
It was a surprise that the Riksbank kept their profile for rate hikes, but investors were quick to take profit below 9.3, Nordea's Christensen said.
The dollar was down 0.4 percent at 84.11 yen, close to a 15-year low of 83.58 yen hit last week. The yen showed limited reaction to Japan's political heavyweight Ichiro Ozawa saying action was needed to stem yen gains.
(Additional reporting by Tamawa Desai)