Investing.com - The dollar hit session lows against the euro on Tuesday as data indicating that the euro zone's service sector is showing signs of recovery boosted the single currency and elsewhere hit fresh two-and-a-half year highs against the yen. During European late morning trade, the greenback was down against the euro, with EUR/USD rising 0.34% to 1.3559. The euro strengthened broadly after a report showed that the Markit services purchasing managers’ index improved to a 10-month high of 48.6 in January from a final reading of 47.2 the previous month and above the preliminary reading of 48.3. The data offset concerns over political tensions in Spain and Italy which pushed peripheral borrowing costs higher on Monday and drove the single currency from 14-month highs against the dollar. The euro briefly trimmed gains after a separate report showed that retail sales in the bloc dropped 0.8% in December, worse than expectations for a 0.5% fall, while November’s figure was revised lower. The dollar hit fresh two-and-a-half-year highs against the yen, with USD/JPY rallying 0.91% to 93.21. The yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep pressure on the Bank of Japan to step up easing measures. The greenback was little changed against the pound, with GBP/USD inching up 0.01% to 1.5762. The pound hit session highs earlier after data showed that the U.K. service’s sector expanded at the fastest pace in four months in January, easing concerns over the economy falling back into a recession. The Markit U.K. services PMI rose to 51.5 last month from a reading of 48.9 in December, outstripping expectations for a reading of 49.8. the greenback was steady against the Swiss franc, with USD/CHF edging up 0.02% to 0.9084. The Swiss franc was little changed after official data showed that Switzerland's trade surplus narrowed to CHF1.00 billion from a surplus of CHF2.90 billion the previous month. The greenback was mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD sliding 0.10% to 0.9977, AUD/USD down 0.52% to 1.0381 and NZD/USD dipping 0.05% to 0.8429. The Australian dollar was weaker after the Reserve Bank of Australia left interest rates unchanged at 3% on Tuesday and indicated that the inflation outlook left scope to cut rates further in the coming months. Meanwhile, official data showed that Australia’s trade deficit narrowed to a seasonally adjusted AUD0.43 billion from a deficit of AUD2.79 billion in December. Analysts expected a deficit of AUD0.80 billion. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, edged down 0.09% to 79.52. The Institute of Supply Management was to publish a report on U.S. service sector activity later in the trading day.

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