The European common currency erased its losses against the dollar after a euro zone official said leaders were finishing the details of a second bailout for Greece worth at least 130 billion euros.
The news eased fears of a chaotic Greek default, driving prices of safe-haven 30-year US Treasuries bonds down more than 1 point.
US stocks were trading higher on reports that showed U.S. jobless benefits claims unexpectedly fell to a near four-year low last week and US housing starts for January rose more than expected.
The news from Greece further boosted sentiment, driving the S&P 500 index to its highest level since May, 2011.
"We're getting this incredible flow of good data. It's hard not to want to step into the market," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
"People are increasingly of the opinion that although Europe will continue to have flare-ups, it's not likely to become a calamity for the world economy,' he added.
In early afternoon trading, the Dow Jones industrial average was up 118.44 points, or 0.93 percent, at 12,899.39. The Standard & Poor's 500 Index was up 13.91 points, or 1.04 percent, at 1,357.14. The Nasdaq Composite Index was up 37.67 points, or 1.29 percent, at 2,953.50.
In Europe, the FTSEurofirst 300 erased losses to edge up 0.1 percent. World stocks as measured by the benchmark MSCI All-Country World Index were 0.35 percent higher.
The euro rose 0.3 percent to $1.310 after falling as low as $1.29744 on trading platform EBS, its weakest since Jan. 25. It also jumped 1.1 percent against the yen, to 103.48, after climbing as high as 103.52 yen, the highest since December 12.
As investors moved into stocks, prices of benchmark 10-year U.S. Treasury notes fell 17/32, sending their yield up to 1.991 percent. Thirty-year Treasuries were 1-06/32 higher in price, their yield at 3.15 percent.
