LONDON: The European single currency rose against the dollar Tuesday after data showed increasing inflation pressures across the eurozone as the economy continues to make headway.
Dealers said the markets were still coming to terms with Monday's US debt outlook downgrade by Standard & Poor's, its first ever such move on the United States, and accompanied by a warning of a ratings cut by 2013 if Washington proves unable to stabilise the public finances.
They said that while the eurozone has its debt problems, the S&P action showed that it was not alone and that all Western countries need to take a serious look at their finances.
"Even though the US has the world's largest and most diversified economy as well as the world's reserve currency, she is also an enormous net borrower on the international capital markets," research group Capital Economics said.
The US is "not a net lender like Japan who can draw on a huge pool of domestic savings to finance her government's yawning fiscal deficit," it said.
The euro rose to $1.4307 in late London trade Tuesday from $1.4236 in New York late on Monday while the dollar fell to 82.43 yen from 82.66 yen.
Gold meanwhile hit fresh record highs just short of $1,500 an ounce as investors opted for its traditional safehaven attributes.
Dealers said eurozone cost pressures were in focus as a closely-watched growth indicator showed the rate of inflation for eurozone goods and services racing towards an all-time high in April.
Prices charged by firms surveyed showed "the largest monthly jump since the all-time high seen during the oil price peak of 2008," said Chris Williamson, chief economist with London-based researchers Markit.
Jonathan Loynes at Capital Economics said eurozone data for April confirmed "that economic activity in the region as a whole is still defying the continued problems in the periphery."
Bond sales by Spain, fighting to keep its head above water, and Greece, bailed out last year by the EU and IMF, were mixed.
Kathleen Brooks at Forex.com said the Greek sale in particular was "a risky move from Athens (but) ... the gamble paid off.
"The euro remains fairly steady in the aftermath and the fact that the auction wasn't a disaster should help to calm markets further," Brooks said.
Yields or the rate of return on benchmark 10-year Greek government bonds eased slightly to 14.334 percent from 14.405 percent on Monday but dealers said it was just a technical adjustment.
"It is only a technical correction and the pressure remains on the country's debt," said Cyril Regnat at French investment house Natixis.
In London late Tuesday, the euro changed hands at $1.4307 against $1.4236 late in New York on Monday, at 117.93 yen (117.67), £0.8775 (0.8752) and 1.2876 Swiss francs (1.2756).
The dollar stood at 82.43 yen (82.66) and 0.9000 Swiss francs (0.8961).
The pound was at $1.6305 (1.6259).
On the London Bullion Market, the price of gold closed slightly lower at $1,490.50 an ounce from $1,493 late Monday, when it hit a record high $1,497.90 thanks to its status as a safehaven investment in troubled times.
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