(Reuters) - The euro hovered at six-week highs against the dollar Monday, but faced a subdued session in Asia as investors awaited confirmation that Greece has secured a long-awaited debt deal that will help it avert a messy default.
The single currency, which jumped some 2.8 percent last week in its best performance in three months, stood at $1.3213 compared with $1.3227 late in New York on Friday.
Shorts continued to cover, but there was also evidently some interest in wanting to be long into the weekend, pending any hard 'good news' announcement prior to Monday morning's Asia-Pacific re-open, analysts at BNP Paribas wrote in a note.
While there was no hard news as yet, two sources close to the Greek talks on Sunday confirmed a deal was largely in place. A final agreement, however, could not be clinched until euro zone finance ministers signed off on it.
In any case, the deal is unlikely to be forged in time for Monday's summit, where euro zone leaders will gather to discuss budget rules for governments and ways to stimulate growth in the crisis-hit continent.
Still, markets appeared optimistic and have all but shrugged off Fitch's downgrade of several euro zone countries including Italy and Spain on Friday.
Immediate resistance for the euro is seen around $1.3250, the 50 percent retracement of the November to mid-January decline. But the clear break above the October trough of $1.3144 suggested an interim base has formed for the common currency.
Traders said the euro remained vulnerable to short covering. Data last Friday showed currency speculators raised their net euro short positions to a fifth straight record high in the week ended January 24.
Against the yen, the euro bought 101.35, up from Friday's low of 100.56. It also firmed against the Australian dollar, climbing to A$1.2409, off an all-time low of A$1.2220 set earlier in the month.
The buoyant euro kept the dollar index .DXY pinned at six-week lows. It was at 78.880, compared with a 16-month peak of 81.784 set on Jan 13.
On the yen, the dollar stood at 76.73, steadying after two sessions of steep declines. The greenback had come under pressure last week after the Fed signaled it would not hike rates until at least late 2014 and kept the door open to additional stimulus.
All of this is seen as positive for risk trades such as shares, commodities and the Australian dollar, while at the same time keeping bond yields down, said Shane Oliver, head of investment strategy at AMP Capital.
The Australian dollar, which scaled a three-month peak of $1.0688 on Thursday, last stood at $1.0637.
Chinese financial markets reopen after the week-long Lunar New Year holidays, but there is no major economic data out of Asia on Monday.
Traders said they were also watching oil prices as a gauge of risk appetite as the conflict between the West and Iran over its nuclear ambition heats up.
(Editing by Wayne Cole)