The euro was underpinned on Tuesday by hopes a way would be found to push through a second bailout deal for Greece, though fresh signs of exposure to Europe's economic troubles among leading banks rekindled investor unease, sending shares lower.
U.S. stock index futures pointed to the unresolved Greek deal weighing on Wall Street at the open, ahead of Senate testimony from Federal Reserve Chairman Ben Bernanke that may grab the spotlight at 1500 GMT after last week's strong jobs data.
Greece's prime minister and leaders of its main political parties are set to resume talks later on Tuesday on new austerity measures demanded by the EU in return for another bailout. The deal needs to be approved by February 15 if the money is to be available in time to meet a March 20 bond redemption.
"I think we are going to hear some news of an agreement. It may not be today, it may not be tomorrow, but the February 15 deadline is absolutely crucial," said Peter Westaway, chief economist, Europe, for Vanguard Asset Management.
The euro dipped by just 0.1% to $1.3120, after initially gaining a similar amount, tracking below a six-week high of $1.3235 hit at the end of January.
"The euro is performing relatively well given the deadlines for Greece keep being extended. This suggests there's more risk of a move to the topside should a deal be agreed," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
Bets by foreign exchange traders that the single currency will fall have been running a record levels according to data from the U.S. Commodity Futures Trading Commission, although the positions were trimmed slightly in the latest week.
Figures on German industrial output, which surprised analysts by showing the biggest fall in December since the start of 2009, did not alter the view that the region's biggest economy would escape a recession in the first quarter.
Berlin's economy ministry said industry orders, which rose more than forecast in December, in fact signalled that a phase of domestic economic weakness was coming to an end.
The dollar was broadly firmer against a basket of currencies gaining about 0.1% to 79.14 on its trade weighted index.
Earnings worries knocks shares
European stocks, which have risen sharply on a flood of cash available to investors at the start of the new year, fell back as a weak earnings update from Swiss bank UBS signalled the debt crisis will wreak further damage on the banking sector.
The FTSEurofirst 300 index of top European shares was down 0.4% at 1,071.19 points after opening unchanged.
Global stock markets were flat on the day having gained more than 8% already in 2012.
"Earnings season has been fairly mixed," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"We still have got difficulties with the banking sector and UBS results signify those concerns. The investment banking sector is a very tough place to be at the moment."
Fallout from the crisis also hit Spain's banking sector, whose three biggest lenders announced billions of euros in extra provisions to meet new government rules on cleaning up soured property assets.
The Australian dollar jumped to a six-month high of $1.0812 after the Reserve Bank of Australia (RBA) confounded expectations of a rate cut. It is one of three central banks meeting this week, all of which have been acting to support an improving global economic outlook with easier monetary policy.
In commodity markets, Brent crude futures rose above $116 to a six-month high as fresh threats from Iran to ban exports to some European states stoked supply concerns, overshadowing the impact of the Greek debt crisis which is capping the gains.
Brent's premium to U.S. oil stayed around $19 a barrel, near its highest since November, after also being boosted by a severe cold wave which has spread across Europe.
Spot gold gained half a%, snapping two straight sessions of losses, as investors waited for the next development in Greece's debt restructuring talks.
Most precious metal markets were subdued by the split among investors over whether the wrangling over Greece would eventually be resolved or trigger contagion across other vulnerable euro zone countries.