Euro against the dollar

The euro has strengthened against both the pound and the dollar as currency traders' fears about European debt levels begin to recede.

Concerns about high deficits in Greece, Spain and Portugal had pushed the euro sharply lower in the past month.

But the currency was up almost half a pence, or 0.5%, against the pound, at 87.93p. Against the dollar, the euro rose 0.3% to $1.374.

European Union leaders meet on Thursday and budget deficits are on the agenda.

Currency traders were particularly buoyed by the news that European Central Bank (ECB) president Jean-Claude Trichet would fly in from Australia to attend the meeting.

"Mr Trichet has not always attended these meetings and so the market is taking his late change in schedule as an indicator that the ECB may be looking to work with the EU on a solution to Greece's debt problems," said Joshua Raymond at City Index.

Last month, the Greek parliament approved a three-year plan to cut the country's deficit from the current 12.7% of its annual gross domestic product (GDP) to 2.8%.

However, some analysts remained unconvinced that Greece could deliver such swingeing cuts.

Fears that Greece's debt problems may be shared by other European states even forced some observers to question whether some countries may be forced out of the euro, further weakening the currency.

But analysts said that hopes the EU will now act to address high debt levels have, for now, quelled such fears.  BBC

Dozens of people including pro-government militia have tried to attack Italy's embassy in Iran, Italian Foreign Minister Franco Frattini says.

Basij militia dressed as civilians hurled stones and shouted "Death to Italy" and "Death to Berlusconi", he told a senate hearing.

Iranian media said a protest took place but made no mention of violence.

Tensions have been high in Tehran since President Mahmoud Ahmadinejad's disputed poll win last year.

Correspondents say the protest could be linked to Italian Prime Minister Silvio Berlusconi's pledge of support for Israel and his call for sanctions against Iran to be tightened, during a visit to Jerusalem last week.

Italian energy company ENI has already said it will pull out of Iran.

Italy is Iran's biggest trading partner in the European Union.

Western powers have stepped up pressure on Iran over its nuclear programme, but Tehran says it has started the process of enriching uranium to 20%.

Attendance cancelled

Speaking at a senate committee hearing on Iran, Mr Frattini said about 100 "hostile" protesters threw eggs and stones at the Tehran embassy but were prevented by police from getting inside.

There was "no significant damage", he said.

Iran's privately-owned Fars news agency said the protesters "condemned the actions of the [Italian] government in supporting seditionists and interfering in Iran's internal affairs".

Protests also took place outside the French and Dutch embassies.

Mr Frattini said Italy had cancelled its attendance on Thursday at events marking the anniversary of the Iranian revolution.

"Contacts are under way at the European level" aimed at sending a "signal of strong concern" over the incidents, he added.  BBC