TOKYO: The euro rose Thursday as news that Spain exited recession boosted hopes for the battered eurozone, while the dollar faced headwinds over speculation the Fed would delay its monetary easing drawdown.
The single currency hovered near two-years highs on the dollar at $1.3789, up from $1.3775 in New York on Wednesday, while it rose to 134.18 yen, from 134.10 yen.
The dollar slipped to 97.28 yen, from 97.32 in New York, although it got a temporary boost after HSBC said China's manufacturing activity expanded at its strongest pace in seven months in October, boosting risk sentiment.
"The outcome reversed a falling momentum just ahead of the" data, a senior dealer at a major bank in Tokyo told Dow Jones Newswires.
Weak US jobs data earlier this week has stoked speculation the Fed would hold off reeling in its $85 billion-a-month bond buying plan until at least early next year, a move that is negative for the dollar.
The figures came after a two-week government shutdown and narrowly averted debt default had thrown the US unit into a freefall, benefiting the euro and yen.
"The debt-ceiling crisis has... prompted investors to reassess their expectations for when the Fed will begin tapering," said London-based Capital Economics.
"But while it is now looking less likely that the US central bank will do so before the end of this year, it is still on course to act before too long. This could take some of the recent steam out of the euro."
Euro sentiment won support from rising consumer confidence figures and after Spain's central bank said Wednesday that the country had inched out of its two-year recession with timid growth in the third quarter -- fuelling fragile hopes of a broader eurozone recovery.
Also Wednesday, the European Central Bank geared up for a year-long audit of the strength of big eurozone banks to withstand crisis, sniffing out risky loans and assets.
Eurozone manufacturing data was due later Thursday.
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