China raised banks' reserve requirements by 50 basis points in early European dealing, a move which saw the Australian dollar AUD=D4 shed some of its earlier gains and dented the single currency's rise.
Earlier, Chinese inflation surged to its highest in 34 months, doing little to rein in market appetite for riskier assets and higher-yielding currencies. read Four Scenarios for the US Retail Sales Report
European stocks held solid gains of 0.8 percent .FTEU3, tracking the upturn in Asian indices.
"The (Chinese) data shows inflation is under control but it is still quite high, which suggests the Chinese authorities will remain hawkish, so we don't see sustainable upside for risk sentiment," said Manuel Oliveri, currency analyst at UBS in Zurich.
The euro's intraday rebound took it back above $1.4400 and through resistance at $1.4450 to a session high of $1.4473 before easing back to $1.4453, up 0.3 percent for the day. Traders said sovereign accounts were selling above $1.4450.
Technical traders said the break back above the 55-day moving average at $1.4405 was a positive sign, while next resistance was at $1.4508, the 50 percent retracement of this month's sell-off.
The euro managed to climb even as European policymakers struggled to sort out their differences over Greece, especially German officials and the European Central Bank who have clashed over the prospect of a "voluntary" debt rollover that may avoid triggering a full restructuring.
Talks about a second bailout for Greece are getting closer to conclusion as the European Commission pushes for a voluntary debt swap, media reported, as euro zone finance ministers meet later on Tuesday to finalise details.
Olli Rehn, the European commissioner for economic and monetary affairs, told Sueddeutsche Zeitung a solution was not as far off as some might think.
On Monday, Standard & Poor's slashed Greece's rating to CCC, making the country its lowest rated in the world.
"The euro remains a sell on rallies as there is still a very high risk of growth momentum slowing down. Also, problems in the periphery should not be underestimated as Germany will stick to its stance on Greece and there is a risk of technical default." said Oliveri.
The single currency was up 0.2 percent against a robust Swiss franc at 1.2088 francs EURCHF=. It was not far from a record low of 1.2004 and option-related stop-losses under the 1.2000 level.
U.S. RETAIL SALES
The market is now turning its attention to inflation figures in other parts of the world, and most importantly to May data on U.S. retail sales for signs on whether the sudden slowdown in the economy is hampering household spending. read Four Scenarios for the US Retail Sales Report
"Clearly the markets are very concerned about the U.S. economy and the U.S. debt situation," said Greg Gibbs, strategist at RBS. "Those are the key factors preventing what would normally be a bigger fallout, given the amount of risk around the European situation."
The high-yielding Australian dollar was up 0.3 percent at $1.0637 AUD=D4, taking a slight hit on China's move to raise reserve requirements.
The dollar index .DXY, which tracks its performance against a basket of major currencies, dipped to 74.318, off a two-week high of 74.960 struck the previous day. For the latest updates PRESS CTR + D or visit Stock Market news Today
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