LONDON—The euro moved higher across the board Tuesday after upbeat German survey data and well-received European government-debt sales helped investor sentiment recover from the downgrade of six European nations by Moody's Investors Service.
The euro was recently trading at $1.31985, compared with $1.3187 late Monday in New York. The dollar was at ¥78.059, compared with ¥77.57, while the euro was at ¥102.990, compared with ¥102.37. The pound was at $1.57550, compared with $1.5766 late Monday in New York.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 79.043 compared with 79.031 late Monday in New York.
The 17-country currency gained ground against the pound, yen and dollar in European trading after German economic expectations improved far more than predicted in February, with the widely watched Center for European Economic Research, or ZEW index, rising for the third consecutive month.
"The ZEW has been a big help," said Daragh Maher, a currency strategist at HSBC in London.
Smooth debt auctions from Italy, the Netherlands, Spain and Belgium helped buoy the tone, with traders largely overlooking dismal data from Greece showing a 7% annual contraction in the final quarter of last year. Reflecting the cautiously positive atmosphere, the commodity-linked currencies of Australia, New Zealand and Canada all moved higher against the dollar in European trading.
Even the pound, which saw its coveted triple-A sovereign debt rating come under fire after Moody's placed it on negative outlook late Monday, gained ground against the buck.
"There was a degree of nervousness in Asia from the Moody's action, but there wasn't really any fresh news in the European context because of what Standard & Poor's Corp. had already done," said Mr. Maher.
The other focal point of the session was the yen, which fell to a three-week low against the dollar after the Bank of Japan surprised markets by expanding its asset-buying program another ¥10 trillion, for a total of ¥65 trillion. The bank also set a "price stability goal," abandoning its long-used "understanding of price stability" phrase.
Looking ahead, U.S. retail sales data due at 8.30 ET could be key. Economists are expecting a reading of plus 0.9% on the month in January, against a previous reading of 0.1%. Beyond that, a euro zone meeting Wednesday to discuss a second Greek bailout will come into focus.
Also Wednesday, the Bank of England will publish its quarterly inflation report, following up on today's data showing the annual rate slowed sharply in January.
"We expect February's Inflation Report to provide a dovish outlook on the U.K. economy and for this outlook to be enhanced by [BOE Governor] Meryvn King's comments," said Sara Yates of Barclays Capital. "The combined impact of the report and press conference will weigh on sterling."
In emerging markets, the stronger euro helped currencies recover ground. Looking ahead, Chile's central bank is expected to keep the benchmark overnight rate, or TPM, at 5%, according to economists.
