The euro slid on Tuesday as weak German and euro-zone data sparked fears of a slowdown, although demand for the dollar and other safe-haven currencies was curbed after Fitch affirmed the United States' top credit rating.
The euro traded above $1.44 while the greenback rose to session highs versus the yen after Fitch Ratings maintained the United States' AAA credit rating, with a stable outlook. Fitch cited the United States' exceptional credit-worthiness and its leading and pivotal role in the global financial system.
"I think this should provide some scope for further improvement in risk appetite," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington. "Stocks will push a bit higher and, ironically, the dollar will struggle against some of the major currencies as it loses some of its safe-haven bid."
Against a backdrop of weak economic growth in Europe, French President Nicolas Sarkozy and German Chancellor Angela Merkel were holding high-pressure talks to discuss what further measures they can take to shore up investor confidence in the euro zone. Few analysts, however, are counting on a credible solution to the euro zone's fiscal problems.
Data released on Tuesday showed gross domestic product in Germany -- the euro zone's largest economy and which has been a standout among industrialized nations -- grew a barely perceptible 0.1 percent in the second quarter, below the consensus forecast of 0.5 percent. The data earlier pushed the euro down more than 1 percent against the Swiss franc.
GDP data from the euro zone also painted a bleak picture, showing the region's economy grew by just 0.2 percent in the same period, adding to pessimism about the currency bloc, which is already struggling with an escalating sovereign debt crisis.
The concerns are likely to make investors wary about the euro in the coming days.
In midday New York trading, the euro was down 0.4 percent versus the dollar at $1.43920, with support at its 100-day moving average around $1.43511. The euro hit a nearly three-week high of $1.44779 on Monday.
Subsequent attempts to buy the euro have been tempered by Eastern European selling below $1.4400, traders said. Sell-stops are cited below $1.4320, while on the topside there is talk of option barriers at $1.45.
Technical analysts said the euro is currently entrenched in a downtrend channel, with selling pressure expected above $1.44 until $1.45.
Sarkozy and Merkel were expected to hold a joint news conference around 12 p.m. EDT. Investors will be keen for any word on the issuance of common euro zone bonds, even though officials in Paris and Berlin said that issue would not be addressed in Tuesday's talks.
Analysts said while the summit would be closely scrutinized, the meeting could be a disappointment with no concrete or long-lasting solution to a debt crisis that has spread from the euro zone's periphery to the core economies of Italy, Spain, and most recently, France.
But some were not ruling out a positive surprise given how most market participants have downplayed the meeting's possible outcome.
Boris Schlossberg, director of FX research at GFT in Jersey City, New Jersey, said if the meeting culminates in some sort of announcement "that hints at a move toward more fiscal unification" the euro could recoup its losses.
The euro turned higher against the Swiss franc to trade up 0.4 percent at 1.13785 francs. The Swiss National Bank was earlier rumored to be checking rates in the currency forward market; it later declined to comment.
The Swiss franc slid against the dollar and euro the last few sessions on speculation the Swiss National Bank may take drastic measures to curb gains in the currency by setting a cap on the franc and pegging it to the euro.
Uncertainty on potential SNB action has showed up in the options market, with implied volatilities, a measure of future movements, staying elevated. On Tuesday, euro/Swiss franc one-month implied vols were trading at 21.65 percent. In April, vols were down at 8.5 percent.
The dollar slipped against the yen to 76.690 yen, dropping near levels seen before Japan's yen-selling intervention on August 4 and hovering near a record low of 76.25 yen hit in March. The greenback earlier hit session highs of 76.931 yen after the Fitch news.
(Additional reporting by Nick Olivari and Steven C. Johnson; Editing by Leslie Adler)