Euro up against dollar on hopes for EU summit

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TOKYO: The euro firmed against the dollar in Asia on Wednesday supported by hopes that eurozone is moving closer to resolving the debt crisis.

The euro picked up to $1.4171 in Tokyo morning trade from $1.4150 in New York late Tuesday. The European common unit rose to 112.25 yen from 112.01 yen.

The dollar traded at 79.20 yen, almost flat from 79.21 yen.

The euro maintained its strength after a European Central Bank official indicated room for flexibility on conditions for a fresh bailout for Greece, raising expectations for a deal at Thursday's eurozone summit meeting.

The ECB Governing Council member Ewald Nowotny told a broadcaster that "some proposals that deal with a very short-lived default situation... wouldn't really have major negative consequences".

"The euro has been underpinned by hopes ahead of upcoming key events such as the EU summit which the market is focusing on (regarding) whether they can reach a deal avoiding default," said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ.

"The German-French summit meeting is also closely watched as Germany's move will be key," Ino said.

Leaders of the eurozone countries are holding an emergency summit Thursday aimed at averting a default by Greece and preventing the debt contagion from spreading to larger economies such as Italy and Spain.

To prepare for the eurozone summit, French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet in Berlin Wednesday.

The dollar, meanwhile, gained against the yen in early Asian trade, encouraged by US President Barack Obama's statement that there was strong progress towards a long-term deal on reducing the US deficit.

The US government has been facing a challenge to raise the nation's debt limit by August 2 to prevent a default, but Democrats had been at odds with Republicans on conditions to raise the congressionally set limit.

The progress in US debt ceiling negotiations has reduced the risk that the US credit rating will be lowered, Hideki Hayashi, global economist at Mizuho Securities, told. (AFP)