The euro jumped to a one-year high above $1.48 this morning. Traders said many investors were selling US dollars - seen as a safe haven asset - due to growing economic optimism.
At one point the euro struck $1.4821 - the highest point since September 23 last year, though it was just below the $1.48 mark this evening.
The euro also remained strong against sterling, standing at just under 90.5p in evening trading.
Sterling had weakened yesterday after a report from the Bank of England, which said the UK currency's long-run sustainable exchange rate may have fallen due to an increased focus on Britain's economic imbalances in the wake of the credit crisis.
In an article in its Quarterly Bulletin, the BoE said changes to Britain's relative economic outlook, the perceived riskiness of UK assets and the need for the economy to rebalance away from domestic consumption all played a role in sterling's fall over the past two years. While some factors behind the decline may be temporary, others could be long-lasting, it said.
