By Josie Cox 

The U.S. dollar slumped to a more than two-week low against the euro Friday, pressured by some weak U.S. housing markets numbers out Thursday, and fears that any more downbeat data could knock investors' confidence in a Federal Reserve interest rate rise later this year.

In early European trade, the euro rose to $1.09, its highest level against the greenback since early April, while the British pound hit a level against the dollar last seen in early March. Later in the session the euro reversed its gains marginally, but remained elevated against the buck.

U.S. new-home sales in March and a preliminary reading of April's factory activity fell below economists' expectations on Thursday. On Friday, data showed that orders for durable U.S. goods jumped a seasonally adjusted 4% in March, but the increase was driven almost entirely by higher demand for autos, commercial jets and military hardware.

A key measure of business investment fell for the seventh straight month to underscore a slowdown in how much companies are spending, sending the U.S. dollar index down 0.2% on the day.

The dollar has had a stellar run over the past few months, fueled by expectations that the Fed will raise rates while other central banks around the world are still aggressively easing.

It has gained more than 11% against the euro so far this year, but a string of recent downbeat economic figures has sparked some concerns that the dollar trade may be becoming overcrowded, especially as expectations for the timing on a first interest rate rise are being pushed back.

Barclays economists said in a report on Friday that the market is now factoring in a 39% chance of a first move in September and a 38% chance of a move in 2016. They only see a 13% chance of a raise in June.

Kit Juckes, a strategist at Société Générale, said that the "consensus is still dollar-bullish" but admitted that it has become "a little tired".

Despite the dollar weakness though, the Turkish lira slipped to a fresh all-time low against the greenback on Friday.

There was no immediate obvious trigger for the move, but Piotr Matys, a currency strategist at Rabobank, said that it could raise pressure on the government to approve a central bank emergency interest rate rise, ahead of an election in June.

Elsewhere on Friday, European shares climbed, but gains were limited as fears over the future of Greece continued to linger.

Having ended the previous session lower on downbeat economic data, the Stoxx Europe 600 closed a little under 0.3% higher. Germany's DAX added just over 0.6% after figures showed that business sentiment improved in April. London's FTSE was up 0.2%, led by HSBC Holdings PLC, on news the bank is reviewing whether to move its headquarters outside the U.K.

In the U.S., the S&P 500 rose 0.2% in later European trade.

European Union leaders met in Brussels on Friday, but even before the talks got under way, the chance of major progress on Greece's bailout looked slim. On Thursday, German Chancellor Angela Merkel met with Greek Prime Minister Alexis Tsipras. "We had a constructive dialogue," Ms. Merkel said after the meeting, adding that she wants to keep the "confidentiality" of the talks.

Asked about the perspective of Greece soon running out of money, Ms. Merkel said: "We have to do everything to avoid that."

"By now it has become clear that we should not expect too much in terms of meaningful steps toward Greece resolving its problems [this week]" said ING strategist Job Veenendaal.

Citigroup wrote in a note that Greece is "running out of money, ideas, time and patience". The current negotiations, they added, "are stuck and the risks of a failure of these negotiations have risen further".

They said that "the bar to an agreement is gradually being raised" and that it is now "plausible that capital controls will be imposed in Greece or a government default takes place before an agreement is struck or that no agreement will be reached."

Greek stock markets have had another turbulent week and the country's main stock index, the Athex Composite, is now close to 8% lower so far this year. Over the past 12 months it has depreciated a little less than 40%, making it one of the world's worst performing indexes.

Yields on Greek government bonds, which rise as the price of bonds fall, have hovered close to multiyear highs this week.

Late Friday, the yield on the two-year bonds was at 25.3%, while the yield on the 10-year was at 12.4%.

A so-called inverted curve, where longer-dated bonds yield less than those that are due for repayment sooner, indicates that investors are factoring in a sharply heightened probability of default, despite the easing of tensions recently.

Yields on German government bonds, meanwhile--commonly valued as a low-risk asset during times of stress--remained a handful of basis points off all-time lows. The 10-year government bond was yielding just 0.15% late Friday. The 30-year bond yield was around 0.58%.

Write to Josie Cox at josie.cox@wsj.com

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