The euro bounced back off five-month lows against the dollar after a relatively encouraging survey into business confidence in Germany diminished expectations that the European Central Bank will cut borrowing costs at next month's rate-setting meeting.
At 1.39 p.m. the euro was trading at $1.1868 having recovered from a new five-month low of $1.1764 earlier today on expectations that the rate differentials will narrow, with the Fed raising rates and the ECB cutting them from their current 2 per cent.
An unexpected upturn in the German Ifo business climate index raised hopes that the euro zone's largest economy is growing stronger than had been expected.
Ifo's main index rose to 96.3 in April from 95.4 in March against expectations of a decline to 95.3. The improvement in the headline index was entirely due to improving current conditions.
However, some of the optimism generated by current conditions was tempered by the third consecutive decline in the expectations component, which fell to 97.8 in April from 98.8 the previous month.