The euro rebounded more than half a cent from earlier three-week lows against the dollar today, its speedy gains attributed by traders to talk of Bundesbank interest in buying euros for commercial purposes.
Analysts said the euro should trade in narrow ranges ahead of the European Central Bank's decision on interest rates at 12.45 p.m. amid some market speculation of a surprise rate cut.
Europe's single currency racked up speedy gains of about a half a cent against the dollar and more than three-quarters of a yen as talk of Bundesbank interest to buy the single currency swept through the market.
The moves in the euro came ahead of an ECB policy meeting at which it was expected to leave its key interest rate unchanged at 4.75 per cent despite this week's global stockmarket rout.
But traders said a cut in rates could not be ruled out, given recent profit warnings from European firms and signs of slowing economic growth.
Given the damage European bourses have sustained in the wake of Wall Street weakness and a flight-to-quality shift into US Treasury securities, a stabilisation in equity markets was seen as crucial for the euro.