SYDNEY (Reuters) - The euro hobbled along three-week lows in Asia on Friday as investors awaited more news from a summit of European leaders amid already diminished expectations that it will yield any concrete measures to tackle the debt crisis immediately.
The single currency traded at $1.2439, having reached $1.2407 overnight -- its lowest since June 4. Against the yen, the euro also plumbed a three-week low around 98.34, before recovering a bit of ground to 98.75.
High-beta currencies like the Australian dollar, which enjoyed a surprise short-covering rally on Thursday, also relinquished most of their gains. The Aussie was at $1.0029, down about a full U.S. cent from Thursday's high.
Not surprisingly, the safe-haven U.S. dollar and yen outperformed. The dollar index .DXY touched a three-week high at 82.879 and was last at 82.738. The greenback slipped to a 1-1/2 week low against the yen at 79.220.
Markets were left with little to be cheerful about at the end of the first day of a two-day EU summit.
European Council President Herman Van Rompuy announced a deal in principle on measures to stimulate infrastructure investment and give more capital to the EU's soft-lending arm, the European Investment Bank.
Behind the scenes though, officials said Italy and Spain had refused to sign off on a 120 billion euro ($149 billion) growth package until EU paymaster Germany approved short-term measures to ease their cost of credit.
But Germany does not want to use its strong credit rating to support weaker members unless they share control of tax and spending powers first. Still, there are some hopes that Germany will eventually soften its stance.
"The main focus will be on the progress of financial integration and the ESM (bailout funds)," analysts at BNP Paribas wrote in a client note.
"We continue to position for a weaker USD following the EU Summit. The market remains very long, USD which means that the USD is vulnerable to selling off on the back of any slightly positive news from the EU Summit."
After the summit, markets will have to contend with the latest reading on China's manufacturing sector. Due on Sunday, the official survey of China's factories is likely to show activity fell to seven-month lows in June.
Such an outcome would compound market concerns that the world's second-largest economy is stuck in a deeper and longer downturn than previously expected, a negative for risk sentiment.
Markets will also be bracing for a slew of U.S. data in a holiday-shortened week ahead, culminating in the closely watched non-farm payrolls data on Friday.
The latest jobless benefits claims report indicated the U.S. job market was still struggling to gain traction. It came as government data confirmed the U.S. economy grew only modestly in the first quarter.
Editing by Wayne Cole