The euro came off multi-month lows against a number of currencies on Friday on reports that Greece would get support from its European peers, although a relief rally remained tentative.
Investors this week had heavily sold Greek and other euro zone peripheral bonds on concerns whether they could grapple with their huge fiscal deficits.
The Financial Times quoted high-level EU officials as saying Greece would in the last resort receive emergency support from other euro zone governments and the European Commission.
"A more positive environment is growing in that it looks like European authorities are putting together a package for Greece and that appears a likely option in coming months," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"That has provided a relief rally for the euro but the broader medium-term trend is still down," he added.
The premium to hold Greek debt against benchmark German bonds narrowed on Friday after hitting record highs this week. The Portuguese/German bond spread widened slightly.
The single European currency was up 0.1 percent on the day at $1.3951, recovering from an early drop to $1.3912 on trading platform EBS, its weakest since mid-July.
Traders eyed whether the pair would end above or below its 55-day moving average of around $1.3983. They also cited large options with strike price of $1.4000 expiring later in the day.
Still, the euro was on track to fall 2.5 percent against the dollar for the month, after a 4.5 percent drop in December.
Against the yen, the euro hit a nine-month low of 124.81 yen on EBS. It was last up 0.4 percent at 125.99 yen.
The euro also tumbled against the Swiss franc, dropping to 1.4645 francs, its lowest since last March, the month the Swiss National Bank intervened to counter franc strength.
Wariness of Swiss central bank intervention capped a further rise in the Swiss franc, traders said.
U.S. GDP EYED
European shares gained 0.8 percent in early trade, after steep losses in Asian stocks and on Wall Street overnight.
Stocks had fallen on sovereign credit risks, lower-than-expected U.S. economic data and concerns about the technology sector. That had helped provide a perceived safety bid for the dollar and yen.
The dollar index, a measure of its performance against six other major currencies, touched a five-month high at 79.156. It was last flat on the day at 78.926.
The dollar rose 0.3 percent at 90.17 yen, recovering from a session low of around 89.59 yen. It had hit a six-week low of 89.14 yen on Wednesday.
The yen's gains were trimmed as dollar buying emerged related to Japanese investment trusts, known as toushin, a trader at a Japanese brokerage said.
A batch of data is due in the euro zone, including inflation and unemployment, but the main data focus will be U.S. fourth-quarter gross domestic product at 1330 GMT.
The U.S. economy is expected to have grown at an annualised 4.6 percent in the fourth quarter, double the rate in the third quarter when the economy resumed expansion after four consecutive quarters of decline.
The U.S. Senate on Thursday backed Ben Bernanke for a second four-year term running the Federal Reserve, but by the stiffest opposition to any nominee for Fed chairman in the nearly 32 years the Senate has voted on the position.
The Aussie fell to its lowest in six weeks below 79.70 yen before recovering some ground to 80.20 yen.
Both the Australian and New Zealand dollars briefly hit their lowest in a month against the dollar.
