The dollar advanced against the euro on Wednesday after a pull-back caused by reduced fears about the fallout from Greece's mountain of state debt.
The European single currency fell to 1.3746 dollars from 1.3764 dollars late in New York on Tuesday. Against the Japanese currency, the dollar firmed to 90.60 yen from 90.13 yen on Tuesday.
Last week, the euro slid to a nine-month low point of 1.3532 dollars, hit by worries that other eurozone countries such as Portugal, Ireland, Italy, and Spain could suffer similar fiscal problems as Greece.
But it rose sharply on Tuesday in US trade after a meeting of European Union finance ministers called on Greece to prepare drastic action by March 16 to rein in its bulging public deficit -- the highest in the 16-member eurozone.
Radical new cost-cutting and tax-raising measures are set to be imposed under newly agreed European Union voting rules.
"The return of the US markets yesterday saw the return of risk appetite as positive earnings and concerns about a Greek debt default ebbed away, after reports out of Brussels seemed to suggest that European finance ministers may get tough with Greece, stripping them of their EU voting powers," said CMC Markets analyst Michael Hewson.
"Reports have also suggested that ministers insisted that if Greece were unable to comply with the austerity demands required by March 16, that they would lose control of their tax and spend policies, and have the cuts imposed by Brussels under a special clause in the Lisbon treaty."
US financial markets had reopened on Tuesday after a three-day holiday weekend.
The euro is widely regarded as a riskier bet on currency markets compared with the US dollar -- which is considered a safe-haven by investors. The shared eurozone unit therefore tends to rise in times of greater economic optimism.
"Investors are focusing only on the euro," said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp. "The outline of the EU plan to stave off Greece's debt crisis has become clearer."
Dealers said that investors were starting to switch back into riskier investments after positive US economic data.
Manufacturing activity in the New York region expanded at a faster pace in February, according to new data that lifted hopes that a recovery in the world's largest economy is well on track.
In London on Wednesday, the euro was changing hands at 1.3746 dollars against 1.3764 dollars at 2200 GMT on Tuesday, at 124.54 yen (124.09), 0.8718 pounds (0.8718) and 1.4684 Swiss francs (1.4677).
The dollar stood at 90.60 yen (90.13) and 1.0682 Swiss francs (1.0659).
The pound was at 1.5766 dollars (1.5785).
On the London Bullion Market, the price of gold rose to 1,119.80 dollars an ounce from 1,115.25 dollars an ounce on Tuesday.
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