A modest improvement in German investors' economic expectations enabled the euro to erase small losses against the dollar and climb into positive territory Tuesday.
The euro lately changed hands at $1.3016, a gain of 0.4%, and added 0.3% against the British pound to 92.41 pence.
The single currency had edged above $1.30 for the first time since February on Monday, only to retreat off its highs in late North American trading after U.S. equity markets gave up gains to start the week.
The dollar index , a measure of the greenback against a basket of major currencies, fell slightly to stand at 86.944.
Coloring the trading in the euro, the ZEW German economic sentiment index improved to a negative 3.5 after jumping sharply to negative 5.8 in February. The index, based on a monthly survey of financial professionals, is compiled by the Mannheim-based Center for European Economic Research, known as ZEW.
The ZEW German current conditions index, however, fell to a negative 89.4, wider than the negative 86.2 seen in February.
Overall, the survey indicates financial professionals expect the recession to bottom out this summer, said ZEW President Wolfgang Franz.
"The economic situation is extremely bad, but there are first signs of hope. They should not be played down," he said.
Economists said the sentiment rebound was somewhat encouraging but noted that the German economy -- the largest in Europe -- is likely in the midst of a severe first-quarter contraction.
'Hardly encouraging'
"The fact that the index is still just about in negative territory means that more financial market investors expect German economic conditions to worsen in the next six months than think that they will improve," said Jennifer McKeown, European economist at Capital Economics.
"This is hardly encouraging given the severity of the recession now," she noted.
Meanwhile, the dollar moved up against the Japanese yen, adding 0.4% to trade at 98.60 yen.
However, the greenback remained for the most part within the day's trading range after the Bank of Japan said it was weighing the "extremely extraordinary" step of providing 1 trillion yen ($10.2 billion) in subordinated loans to Japanese banks.
Such a move would be part of an effort to bolster capital ratios and ensure the stability of the financial system in the No. 2 global economy.
Rounding out the foreign-exchange action, the British pound was little changed against the dollar at $1.4074.
