(Adds quotes, background on summit)
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* No end in sight to U.S. virus surge
* Dollar supported on safe-haven flows
By Julien Ponthus
LONDON, July 17 (Reuters) - The euro was heading for
four-month highs on hopes a European Union summit will make
progress on a recovery fund that would help lift the EU out of
recession and deepen its integration.
No outcome is expected at the summit until evening, at best,
but an agreement or a collapse in the talks would have a major
impact on the currency when trading resumes.
The euro EUR=D3 was up 0.4% against the dollar, at
$1.1425, near Wednesday's $1.1452, its highest since the
coronarivus financial crash in March.
"Markets appear to be constructive on the euro in an
anticipation of progress towards the recovery fund at the EU
summit over the weekend", said Petr Krpata, a foreign exchange
strategist at ING.
The euro could hit the $1.15 level should progress be made,
Krpata said.
"This would be also supportive of other European currencies
such as the ‘scandies'", he added.
The dollar was up 0.38% against the Norwegian crown at
9.3085 but still close to its lowest levels since March. It fell
0.43% against Sweden's crown, which was also near four-month
highs.
Implications for the euro should the EU go ahead with its
plan would be long-lasting, Marshall Gittler, head of investment
research at BDSwiss, told his clients.
A deal "would make the euro more attractive as a reserve
currency" by "establishing a central fiscal capacity that can
respond to adverse shocks, which would make monetary union more
stable", he said.
Many traders doubt the summit will reach an agreement and
assume EU leaders will need to meet again to find a compromise.
Officials said the summit could drag into Sunday if an
agreement remains elusive. Luxembourg Prime Minister Xavier
Bettel told Reuters he had brought an extra set of clothes just
in case. The euro EURGBP= also made gains against the British
pound, up 0.4% at 0.9102 pence. The pound was set for its
biggest weekly fall versus the dollar in a month, as uncertainty
over Britain's economy, Brexit talks and a high COVID-19 death
toll weighed on the currency.
The pound is on track to be the worst-performing G10
currency this week, after weaker economic data raised concerns
over the possibility the Bank of England will introduce negative
interest rates.
For the week, the dollar was on course for gains against
sterling, the yen and the Swiss franc.
Some investors say they are beginning to see signs that a
surge in coronavirus infections is threatening the U.S. economy.
Others point to deteriorating U.S.-China ties as a reason to
avoid riskier trades, which should keep the dollar in demand for
now.
The dollar stood at 107.11 yen JPY= and 0.9410 Swiss franc
CHF= , close to its highest since July 3.