Dollar Drop Shot!

LONDON (MarketWatch) — The U.S. dollar fell sharply on Monday, while the euro gained after media reports gave investors hope that policy makers will be able to get a grip on Europe's debt crisis.

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The dollar index DXY -0.96% , which measures the performance of the greenback against a basket of six major currencies, dropped to 78.973 from 79.688 in late North American trading on Friday.

The euro EURUSD +0.50%  rose to $1.3357 against the greenback from $1.3224 in late trading on Friday.

Investors lately have flocked to the U.S. dollar for its perceived safe-haven qualities as Europe’s debt troubles have escalated. Italian bond yields have climbed to levels markets regard as unsustainable in the long term, while Hungary and Belgium saw credit-rating downgrades late last week.

However, weekend reports suggested a range of fresh developments could be in the cards for Europe.

Separate news reports said that European officials have agreed on how to leverage a key rescue fund, and that French and German officials were discussing deeper integration. more