FOREX-Dollar dips, euro hovers under 18-month high as EU negotiates rescue fund

* Euro rises against dollar, near four-month highs
* No end in sight to U.S. virus surge
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(New throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, July 17 (Reuters) - The euro rose against the
dollar to just under four-month highs on Friday, following the
kick-off of a European Union summit that market participants
hope will advance a recovery fund that would help lift the EU
out of recession.
No outcome is expected at the summit until Friday evening at
the earliest, but an agreement or a collapse in the talks would
have a major impact on the currency when trading resumes.
The euro EUR= was up 0.38% against the dollar, at $1.143,
near Wednesday's top of $1.145, its highest since the
coronavirus financial crash in March.
"The euro favored four-month highs on hopes that Europe's
fiscal leaders would move toward agreement on a massive 750
billion-euro rescue fund. A positive outcome by the end of the
EU summit Saturday could potentially be the euro's ticket to
fresh highs for the year," said Joe Manimbo, senior market
analyst at Western Union Business Solutions.
The euro could break through the technically significant
$1.15 level - which hasn't been touched since February 2019 - if
progress is made.
"The euro's outperformance already has it less than a penny
away from a key threshold it last touched in February 2019.
Conversely, a disappointing outcome that merely kicks the fiscal
can down the road would risk an unwinding of recent euro gains."
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 end in 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 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 GBP= , the yen JPY= and the Swiss franc CHF= . The
dollar index =USD , which heavily weights the euro, was last
0.25% lower at 96.037.