Euro Rises on Upbeat Economic Data

        By Josie Cox and James Ramage
        The euro surged to its highest level against the dollar in seven weeks after a run of upbeat European manufacturing and services data.
        The euro rose as much as 0.5% against the greenback, to $1.3952. The common currency later pared gains. In late New York trading on Tuesday, one euro bought $1.3930, up from $1.3876 on Monday.
        Helping to drive the euro's gains were positive readings on Europe's economy. A gauge showed that Spain's services sector in April grew at its strongest pace since March 2007, before the global financial crisis. A similar gauge for Italy also indicated expansion.
        For the euro zone as a whole, Markit's composite purchasing managers index, which combines service and manufacturing sectors, hit its highest level since May 2011, meeting expectations. Meanwhile, the U.K. services PMI reading beat forecasts.
        "The stronger data are driving the euro higher and putting the dollar under pressure," said Martin Schwerdtfeger, foreign-exchange strategist at TD Securities.
        The British pound rose to a fresh 4-and-a-half-year high against the dollar. Positive U.K. economic readings are likely to push forward the first rate hike by the Bank of England, which is positive for the currency, also known as the sterling, Mr. Schwerdtfeger said. In late New York trading, the British pound was up 0.7% against the dollar at $1.6977, compared with $1.6866 on Monday.
        The sharp moves higher by European currencies come amid a broad slump in the dollar, with analysts saying many investors are now giving up on the positive bets on the buck that were popular at the start of this year. The dollar fell to a fresh three-week low against the yen and a seven-week low against the Swiss franc. The greenback lost 0.5% against the yen, to 101.67 yen.
        The inflation-sapping strength in the euro adds extra complexity to the European Central Bank's policy meeting this week as the central bank previously noted that the euro's ascent weighs on prices.
        "The euro resilience seems driven by market expectations of no action by the ECB on Thursday as well as persistent speculations of central bank reserve diversification into euros," said analysts at Citigroup.
        The dollar had been expected to climb in response to signs of resurgence in the U.S. economy, but a mixed bag of data, with weak growth alongside bright spots in measures of employment, has left the greenback under pressure.
        The WSJ Dollar Index, which measures the value of the greenback against 16 of the most commonly traded currencies, fell 0.5% Tuesday, to 72.459, its lowest level since Oct. 30.
        Tommy Stubbington contributed to this article.
        Write to Josie Cox at Josie.Cox@wsj.com
        (END) Dow Jones Newswires

        May 06, 2014 17:13 ET (21:13 GMT)