By Fabio Alves OF DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The dollar slid against the euro early Tuesday in New York as speculation that the European Commission will endorse Greece's plan to reduce its budget deficit Wednesday lent support to the single currency.

The euro hit an intraday high against the dollar just before the New York trading got underway as spreads between 10-year Greek government bonds and similar German securities narrowed. The common currency also strengthened against major rivals, including the yen and the U.K. pound.

"The euro is being boosted moderately by (Wednesday's) potential agreement about how Greece is going to deal with its deficit," said Michael Hewson, a currency analyst at CMC Markets in London. "It (an agreement with the EU) eases concerns over Greece in the short term."

Early Tuesday in New York, the euro was at $1.3947 from $1.3930 late Monday, according to EBS via CQG. The dollar was at Y90.71 from Y90.65, while the euro was at Y126.49 from Y126.29. The U.K. pound was at $1.5935 from $1.5962. The dollar was at CHF1.0564 from CHF1.0561.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 79.138 from 79.194.

The spread on 10-year Greek government bonds over bunds dipped below 330 basis points, down from the 400-basis-point peaks seen at the end of last week.

The cost of insuring Greek debt against default was also slightly better at 376 basis points from 380 basis points late Monday, according to CMA Datavision.

"Stabilization of the Greek bond markets ahead of (Wednesday's) EU verdict on the Greek budget plan has provided only limited support for the euro," Brown Brothers Harriman strategists wrote in a note to clients. "The single currency has tended to react more to bad news from Greece than good news and today's euro rally may provide short-term traders with an opportunity to sell."

Greece had a budget shortfall close to 13% of gross domestic product in 2009. It has outlined spending cuts and measures to boost tax revenue, which it said will slash the budget deficit to 3% of GDP by 2012--the limit set by European Union rules.

The Greek plan--on which the commission will release a report Wednesday that will go to EU finance ministers for final approval on Feb. 15 and 16--is crucial for both for Greece and other countries that use the common European currency.

Meanwhile, the Australian dollar tumbled more than 1% against the greenback after the Reserve Bank of Australia stunned financial markets Tuesday with a decision to leave its cash rate target unchanged at 3.75%, saying it needs time to assess the effects of rate rises in late 2009 and hefty increases in bank lending margins.

The central bank said it would resume its policy tightening if the economy grows as expected and many economists expect the RBA could raise interest rates as early as March.

"The message from the RBA seems to be that although the outlook remains for rate hikes, inflation is low enough for the RBA to be able to take its time with these to avoid the risk of a policy mistake," Credit Suisse Group AG strategists wrote in a note to clients Tuesday.

Investors will be eyeing the 10 a.m. EST release of U.S. pending home sales for December as well as Treasury Secretary Timothy Geithner testimony before the Senate Finance Committee on the President's fiscal year 2011 budget.