At the session peak, the euro climbed to near US$1.34 as its sharp rebound prompted investors to cover short positions. At current prices, the euro was on track for its best weekly performance since May, 2009, though some analysts cautioned that the euro's downtrend is far from over.
ECB President Jean-Claude Trichet said price stability was not under threat, remarks that drove expectations the ECB could raise interest rates, helping to spark the short-covering.
Strong demand at Spain's bond auction, one day after a solid Portuguese debt sale, helped ease pressure on peripheral bond markets, although analysts noted sales represented a very small percentage of supply from those countries this year.
Analysts said the euro may see some support on speculation that a solution to the debt crisis may come soon. Top European Union officials are pushing for the bloc to increase the size and scope of the EUR440 billion ($574 billion) rescue fund.
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