The euro held near a nine-month low against the dollar on Tuesday, with all signs that euro zone policymakers will focus on making Greece fully implement budget cuts rather than gifting it swift financial aid.
Athens' relative cost of borrowing rose again ahead of a finance ministers meeting which markets now see offering little hope of a quick fix to a crisis that has rocked the wider euro zone.
World stocks improved slightly in trading thinned by holidays in China and the United States.
But concerns were also intensifying over the debt restructuring of state-owned conglomerate Dubai World, which pushed the cost of insuring Dubai sovereign debt against default 11-month highs.
Euro zone finance ministers meet on Monday in Brussels.
The European Commission said it could call on Greece to take additional measures to reduce its budget deficit but that it was waiting for a mid-March evaluation of the government's action.
The market will be looking for any confirmation of support (from the finmins) for the Greek authorities, but it looks like Germany in particular will be asking for more fiscal measures before they're prepared to provide that, said Nick Stamenkovic, rate strategist at RIA Capital Markets.
So that might stall the recent improvement in Greek spreads.
The premium investors demand to buy 10-year government bonds in Portugal and Ireland -- other highly indebted euro countries -- rather than German benchmarks rose.
Greek markets are shut for a holiday but five-year credit default swaps -- measuring the cost of insuring sovereign debt against default -- stood at around 352 basis points on Friday. Commerzbank said CDS pointed to a default probability of 21 percent.
European Union leaders said last week the euro zone would take determined and coordinated action to safeguard financial stability, a vague pledge which disappointed investors.
The euro held steady at $1.3620, having fallen as low as $1.3529 on Friday. The dollar .DXY was unchanged against a basket of major currencies. The MSCI world equity index .MIWD00000PUS was up 0.2 percent, after posting its first weekly gain in a month last week. The FTSEurofirst 300 index .FTEU3 gained 0.7 percent with banks such as HSBC (HSBA.L) and Barclays (BARC.L) leading the way. Emerging stocks .MSCIEF rose 0.15 percent.
U.S. crude oil rose 0.1 percent to $74.21 a barrel.
The bund futures fell 15 ticks.
The failure of a bailout... cannot be excluded completely, Commerzbank said.
We do not consider the danger of this happening to be very strong, the fear of such a scenario alone should however put considerable depreciation pressure on the euro.
Figures from the Commodity Futures Trading Commission showed speculators had amassed record short positions in the euro, essentially betting it had further to fall.
SECOND WAVE OF DUBAI CRISIS?
Dubai's five-year CDS rose as high as 651 basis points, according to CDS monitor CMA DataVision, above the high reached after the Dubai government announced a standstill on debt held by Dubai World DBWLD.UL in November.
The conglomerate is in talks with banks on the debt delay -- about $22 billion linked to its main property units Nakheel and Limitless World -- but bankers say it has yet to present a formal proposal.
Nervousness over the fate of the debt grew, however, after Dow Jones reported it was mulling a two-part deal, including one that may repay lenders 60 percent over seven years.
Dubai denied the report on Sunday but investors, already spooked by a lack of information on the company's plans to repay the debt, reacted with dismay to the reported proposal.