Euro hits two-month dollar peak
In morning London deals, the shared eurozone unit struck $1.3775, the highest level since November 22. That compared with $1.3686 in New York late on Monday.
Against the Japanese currency, the dollar fell to a one-month low of 81.56 yen, from 82.04 yen on Monday.
The euro rose as "speculation is mounting for potential rate hikes" following strong eurozone consumer price data on Monday, said Yuichiro Harada, senior dealer at Mizuho Corporate Bank.
The rising trend in oil and commodity prices is fuelling concerns over inflation in the eurozone, he told Dow Jones Newswires.
The European Union's Eurostat agency said Monday that eurozone annual inflation shot up to 2.4 percent in January, fuelling fears of an early rise in interest rates.
It marked the highest level since October 2008 and breached for the second successive month the European Central Bank's core target for economic management, inflation close to but not above 2.0 percent.
Investors will pay attention to a speech later Tuesday by ECB president Jean-Claude Trichet in Milan, dealers said. The euro may extend its gains if the central bank chief takes a hawkish tone, they added.
Emphasising the eurozone's inflationary pressures, a key indicator of manufacturing health published Tuesday showed a record rise in raw materials costs with goods prices also rising at the fastest pace since the economic crisis began.
The final eurozone manufacturing purchasing managers' index produced by London-based researchers Markit hit a nine-month high of 57.3 in January, up from 57.1 in December and above the earlier flash estimate of 56.9.
It has now remained above the flat 50.0, which indicates growth, for 16 months.
The market was meanwhile awaiting US manufacturing data due Tuesday.
"We expect to see evidence of a gradual recovery in the manufacturing sector," said VTB Capital economist Neil MacKinnon.
In London on Tuesday, the euro changed hands at $1.3775 against $1.3686 in New York late Monday, at 112.34 yen (112.31), £0.8544 (0.8545) and 1.2957 Swiss francs (1.2926).
The dollar stood at 81.56 yen (82.04) and 0.9408 Swiss francs (0.9443).
The pound was at $1.6120 (1.6016).
On the London Bullion Market, the price of gold rose to $1,339.51 an ounce from $1,327 late on Monday.