The euro jumped today after European Union leaders reached an agreement on migration that eased pressure on German Chancellor Angela Merkel.
But traders said the gains may be short-lived because of deep divisions within the EU.
A tense summit that dragged on into early this morning yielded vague pledges from EU leaders to strengthen external borders and explore new migrant centres.
The deal eased concern over a standoff between Italy and the rest of the trading block and the euro subsequently rallied against the dollar, the Swiss franc, the British pound and the Japanese yen.
The euro was up 0.7% against the dollar at $1.1652 this afternoon and headed for its biggest daily gain in a month.
Analysts said that the migration deal should ease the burden to countries such as Italy as it reduces the chances of an imminent split among the EU countries and is perceived as euro positive.
Euro zone inflation rose to its highest rate in more than a year this month because of surging energy prices but the euro barely moved on the data.
Risk sentiment improved after the migration agreement, undermining the yen and lifting growth-linked currencies such as the Australian dollar.
Analysts said risks remained for the euro because the agreement was non-binding and the summit showed how divided Europe has become, particularly with the emergence of a new eurosceptic government in Italy.
Meanwhile, the dollar index against a basket of six major currencies was down 0.6%at 94.872. It had risen as high as 95.534 on Thursday, a level last seen almost a year ago.
Despite today's drop, the index was up 5.5% this quarter, its first rise since the final quarter of 2016.
The dollar's gains partly stemmed from the prospects of rising US interest rates. It also got help in the past week from repatriations before the end of quarter and half year.
But its overall strength, especially against many emerging currencies, probably reflects repatriation on increasing worries about US trade disputes, some traders said.
One currency that has weakened against the dollar is China's yuan, which hit a seven and a half month low of 6.6522 today.
The currency has lost 3.5% this month, surpassing the 2.7% fall seen in August 2015, when Beijing shocked markets by unexpectedly guiding the yuan lower.
Meanwhile, sterling rallied sharply today after a better than expected revision to Britain's first quarter economic growth raised expectations of monetary policy tightening later in the year.
Adding to the bounce, the European Union's chief negotiator Michel Barnier said that EU leaders had made progress in Brexit talks though big differences remained.
