The euro perked up against major currencies on Monday after a report showed the euro zone’s manufacturing sector was doing better than expected.
Industrial production rose by 0.8% month-on-month and a record 9.5% year-on-year in April. Risk appetite picked up, sending the euro up to $1.2249 from $1.2087 on Friday.
The euro even managed to retain most of its gains following news that ratings agency Moody's cut Greece's debt ‘junk’ bond status.The dollar index, which measures the US currency against a basket of six others, fell to 86.513 on Monday from 87.469 the previous session as safe haven demand dwindled.
The dollar also moved lower against the Japanese yen following Moody’s downgrade of Greece’s debt.
Sterling jumped to a one month high against the greenback on Monday as risk appetite picked up. Figures showing the UK’s public debt will fall quicker than previously thought increased demand for sterling.
The Office for Budget Responsibility also said the UK economy will only expand 2.6% in 2011, below the 3.25% predicted in Alistair Darling's last Budget.However the market focused more on news that the deficit is now forecast to fall to 10.5% of GDP in the 2010-11 financial year compared with the 11.1% estimated by Labour. The pound rose to $1.4766 from $1.4521 Friday.