The euro walked back from profits to losses against the dollar as investors bet that the gains supported by rising European money market rates were overdone. Adding to that, the Dollar was seen low against the yen when a private survey showed that the US consumer sentiment weakened and this news added to negative sentiment on the greenback and drove the dollar down.
John McCarthy, director of foreign exchange trading at ING Capital Markets in New York said: "The euro is still relatively well bid and I would not be surprised to see 1.3200 next week as people continue to want to get out of these mature short positions. It just got a little too far, too fast."
Paul Mackel, director of currency strategy at HSBC in London said: "The euro’s going up on light volume, there’s not much liquidity today but european yields are rising and that’s helping to drag the euro higher.
The European currency was slightly lower at $1.2920. The dollar was down 0.9 percent at 86.67 yen.