The dollar slumped on Wednesday as markets awaited a resolution to the debt-ceiling standoff in Washington, while the euro rose amid hopes for a productive eurozone summit in Brussels this week.
The dollar was trading for $1.4212 against the euro at 2100 GMT in New York on Wednesday, compared to $1.4150 late on Tuesday.
The greenback also weakened against the Japanese yen, trading for 78.77 yen, down from 79.21 a day earlier.
US President Barack Obama was set to meet with opposition Republican leaders late Wednesday to seek a compromise solution to the debt-limit impasse, which could provoke a US government default if it is not resolved.
Obama has warned of economic “Armageddon” if the United States defaults on its debt and has urged Democrats and Republicans to work together to forge a deal on raising the government’s $14.29 trillion debt ceiling.
The White House has said Congress should approve a deal by Friday in order for the legislation to take effect by August 2, when the US Treasury says it could be forced to default unless it can borrow more money.
“If Friday comes to pass with no major news, we could see panic selling of US dollars,” said Kathy Lien, director of currency research at GFT.
“The greenback traded lower against all of the major currencies today while stocks held steady in anticipation of the big-event risks scheduled for the next 48 hours.”
Meanwhile, eurozone leaders are set to gather for an emergency summit on the Greek debt crisis in Brussels on Thursday, and the euro climbed amid hopes that progress would be made at the summit, analysts said.
“Speculation of some agreement has helped lift the euro, peripheral bonds and generally has underpinned the risk appetite in recent days,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman.
The dollar weakened against the Swiss franc on Wednesday, falling to 0.8195 francs in late trading in New York from 0.8240 a day earlier.
It also lost ground against the British pound, weakening to $1.6147 against the pound from $1.6132 on Tuesday.
