The euro inched up in choppy trading on Tuesday on hopes that squabbling policymakers will come up with a solution to avoid a debt default by Greece, sentiment that also buoyed Asian shares.
Markets are waiting for a confidence vote on the government in the Greek parliament later in the day, a step toward the passage of more spending cuts in exchange for foreign emergency loans.
Meanwhile, international lenders are making an unexpected visit to Athens to check on its resolve to implement painful austerity plans that have caused weeks of public protests and political confusion.
The euro last traded at $1.4347, well above the three-week low of $1.4073 it hit last Thursday, but down from the day's high of $1.4385.
In the big scheme of things, market players are starting to believe that euro zone policy makers, especially German policy makers, will try to avoid a hard landing in Greece, said Makoto Noji, senior strategist at SMBC Nikko Securities.
If the confidence vote is passed, the Greek parliament will vote on the austerity measures by June 28. Euro zone finance ministers gave debt-crippled Greece two weeks from Monday to approve further spending cuts and tax rises in return for another 12 billion euros in emergency loans.
Were Greece to default on its sovereign debt, markets fear it could trigger a global financial crisis in much the same way that Lehman Brothers' collapse did in 2008. This time, however, debt-laden governments and central banks may have far less room to offer any fresh stimulus to shore up economic growth.
Credit rating agency Fitch said on Tuesday it would regard both a Greece sovereign debt swap and a rollover of maturities, even a voluntary one, as a default.
As the euro recovered, the dollar index <.DXY> lapsed to 74.837 from a top of 75.472.
Investors are also eyeing a meeting of the U.S. Federal Reserve on Tuesday and Wednesday, at which it will give its views on U.S. economic growth. Since its last meeting in April, the economy has taken a decidedly weaker tone, but there is no evidence yet that it may be sliding back into recession.
Japan's Nikkei average <.N225> ended 1.1 percent higher, while MSCI's index of Asia-Pacific stocks <.MIAPJ0000PUS> excluding Japan advanced 1.2 percent. Indexes in Hong Kong, South Korea and Taiwan also rose.
The outlook for the Nikkei was largely rangebound trading for the rest of June, an analyst said.
At least until the central bank's tankan is out (on July 1), rises are likely to be limited to around 9,500, said Kenichi Hirano, a strategist at Tachibana Securities, referring to the Bank of Japan's quarterly survey of corporate sentiment.
The market has priced in bad sentiment for the April-June quarter, but if the outlook for July-September is bright, the market may rise further.
Brent crude oil for delivery in August was steady at $111.90 a barrel. ICE Brent futures lost 1 percent on Monday as worries about a resolution to the Greek debt crisis made investors more risk averse, traders said.
Gold inched up to $1,542.34 per ounce by 0524 GMT, after closing at $1,540.95 on Monday. Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.
(Reporting by Ayai Tomisawa and Hideyuki Sano in Tokyo; Editing by Kim Coghill)