The US dollar took a beating on Friday after news of a record current account deficit reignited concerns about how the US will keep attractive enough foreign capital without stirring more trouble for the economy.
The euro rallied to US1.2286 at 9pm GMT against US$1.2109 late Thursday in New York.
The US dollar was meanwhile trading at ?108.50 after ?198.91 on Thursday.
News of a worse-than-expected US first-quarter current account deficit earlier on Friday helped spark some dollar selling, as concerns over financing the huge shortfall re-surfaced.
"The market was reminded of the origin of the greenback's structural decline over the past three years," said Michael Woolfolk, senior currency strategist at the Bank of New York.
Other observers said the impact from the day's economic releases was limited, with technical factors and week-end consolidation salving what had been a bruised euro.
"In the short-to-medium term, people are still bullish on the dollar, but the current account deficit is still in the background," said Gary Noone at Informa Global Markets.
Anxiety over how the US will manage to finance both its current account and budget deficits was the major factor behind the dollar's sharp falls at the end of last year.
Official figures revealed that the current account deficit widened more than expected in the first quarter, coming to a record US$195.1 billion, representing 6.4 percent of gross domestic product and eclipsing expectations of a US$190 billion shortfall.
But with the momentum still firmly favoring the dollar at the moment, any losses are likely to be limited, analysts said.
"Although somewhat backward looking, the [US current account] news is not so good for the dollar in theory. But as it has been doing over recent weeks, the dollar is likely to ignore bad news for now," Mitul Kotecha at CALYON said.
The bad news was also offset to some extent as the University of Michigan reported that its consumer sentiment index rose to 94.8 from 86.9 last month, well above forecasts for a much more modest rise to 88.6.
But analysts doubt that the euro will be severely damaged by the outcome of a contentious EU summit in Brussels, which failed to reach agreement on a budget deal.
"The market is a little sensitive to any political news on the EU front, but it seems to have shrugged off the ... summit and more or less discounted a negative outcome. People have become so short of euros in the last couple of weeks there are few people left wanting to sell," Noone said.
In late New York trade, the US dollar stood at 1.2571 Swiss francs, from SF1.2717 on Thursday. The pound was being traded at US$1.8309 from US$1.8224 late on Thursday.
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