The euro halted its fall against the dollar

The euro inched higher against the U.S. dollar Thursday in Asian trade, but remained close to recent lows amid concerns about a worsening sovereign debt crisis in the euro zone. The euro rallied back above $1.3200 after it fell below the key psychological level early in the session. Analysts said there's still a significant chance that the single currency will soon tumble past the one-year low of $1.3114, which was reached Wednesday in the wake of Standard & Poor's downgrade of Spain's long-term debt.

Photo: The euro halted its fall against the dollar

Spain's downgrade followed S&P's cut on Tuesday of the ratings of Greece and Portugal, which had sent the euro down to the first of a series of 12-month lows below $1.3200. The euro has also been hurt by media reports that Greece may need a bigger bailout package than the $45 billion already agreed with the European Union and the International Monetary Fund, Wall Street Journal says.

On Wednesday, Angela Merkel joined the head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, in calling for talks on a rescue deal to be sped up.

"It is perfectly clear that the negotiations with the Greek government, the European Commission and the IMF need to be accelerated," she said. "We hope they can be wrapped up in the coming days.", BBC News reports.