The euro jumped back above $0.89 yesterday as investors dumped the dollar following a sharp fall on Wall Street, where technology stocks were being hammered. In late trade, the euro was at $0.8925, sharply up from $0.8797 in New York the previous day. The dollar was punished after a weak start on Wall Street, where the blue-chip Dow Jones industrials index fell 1.5 per cent and the technology-laden Nasdaq index tumbled 3.5 per cent, traders said.

The euro, sterling and yen were all higher as the dollar consolidated, said Halifax economist Mr Steven Pearson, who warned however that the single currency could still come down.

Hopes for a European Central Bank rate cut on April 11th helped support the single currency. But analysts were doubtful that the euro's recovery marked a turning point.

Economists said the dollar had also been weighed down by figures from the National Association of Purchasing Management on Monday, which showed an unexpected rebound in US manufacturing activity in March. Dealers were concerned the recovery might limit the scope for further cuts in US interest rates.

The euro's resurgence defied downbeat economic data. Eurozone economic sentiment slowed for the third month in a row in March, but beat economists' forecasts, data released by the Commission showed.

The closely watched headline index for economic confidence in the 12-nation euro area fell to 102.2 in March, down from a revised 102.8 a month earlier but above the 102.1 forecast. The euro-zone industrial confidence indicator fell by two points to -1 in March.

Sterling was slightly firmer, with expectations running high for an interest rate cut by the Bank of England tomorrow. on Thursday.