The euro climbed a third day on Thursday as a deal between France and Germany over a bailout of Greece raised hopes ahead of a major European summit, though investors barely moved from government bonds and precious metals.
Pending details of the joint deal that supposedly included European Central Bank President Jean-Claude Trichet, investors were cautious about pushing equity markets any higher, with Asian stocks flat, weighed by the tech sector after a rally in the prior session.
Deep questions remain about Europe, including whether the second bailout of Greece will address contagion in other fiscally weak countries such as Portugal and Ireland or even Spain and Italy, whose bond markets have been savaged in July.
Judging from the current crop of headlines, the most negative outcome for the euro would be a debt rollover without additional measures, Todd Elmer, currency strategist with Citi, said in a note.
Of course, the euro already appreciating ahead of the meeting and moves in other asset classes somewhat more modest than the FX price action would suggest it is far from clear that currency gains could be sustained beyond the short-term.
Dealers in Asia were also positioning ahead of HSBC's flash PMI for China due at 0230 GMT. The index is close to the threshold that separates growth and contraction in the manufacturing segment, and could rekindle fears of an abrupt slowdown in the world's second-biggest economy.
The euro was up 0.2 percent around $1.4250 after hitting a session high near $1.4275 on news of an accord between France and Germany over Greece.
With uncertainties still high about negotiations over the U.S. debt ceiling, traders may push the euro higher against non-dollar currencies. Indeed, the common currency was already up 0.5 percent against the Swiss franc, at 1.1715 francs.
Japan's Nikkei share average <.N225> was nearly unchanged in early trade, with weakness in tech-related stocks offsetting some strength in retailers.
The tech sector was getting whipsawed after weak results from Yahoo Inc
Apple's blockbuster results had given the sector a shove higher on Wednesday.
The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> was also flat. The index has bounced 3.5 percent since hitting a 3-month low in June.
Price action reflected more of a trimming of bets on so-called safe havens but not yet a wholehearted move back into outright risk taking.
U.S. Treasury futures were down 6/32 to 124-13/32, though still are not far from a seven-month high reached in June.
Precious metals were also off recent highs, with gold down 0.1 percent at $1,598.34 an ounce. Gold hit a record high of $1.609.51 on July 19 and has risen 6.6 percent in July.