Dollar slips; Germany’s Ifo gauge boosts euro

NEW YORK (MarketWatch) � The U.S. dollar weakened Thursday, while the euro got a boost from a stronger-than-expected jump in a closely followed gauge of German business confidence.

The euro EURUSD �rose to $1.3367, from $1.3246 in North American trading late Wednesday.

The shared currency climbed as high as $1.3373, the loftiest level against the dollar since mid-December.

The ICE dollar index DXY , which measures the U.S. unit against a basket of major currencies, fell to 78.677 from 79.207 Wednesday.

The Munich-based Ifo Institute�s index tracking the business climate in Germany, Europe�s largest economy, improved to 109.6 in February from 108.3 in January, easily trumping expectations for a reading of 108.8. Read more about Ifo results for February.

/quotes/zigman/4867933/sampled EURUSD 1.2517, +0.0004, +0.0320%

�The relative strength of Germany goes some way to explain the apparent resilience of the euro to the euro-zone crisis through most of last year and so far in 2012,� said Jane Foley, senior currency strategist at Rabobank International.

The strength of Germany and many other core euro-zone countries �in terms of current account position and debt and deficit/GDP ratios suggest that these countries would be maintaining much stronger currencies if they were operating outside� the realm of economic and monetary union, she said.

Capping the gains, the European Commission cut its forecast for euro-zone growth. The European Union�s executive arm said that the region is suffering a �mild recession� and that it now expects the region�s economy to shrink 0.3% in 2012 � a reversal from its November forecast calling for growth of 0.5%.

The revision puts the commission�s forecast move more in line with consensus expectations. Read about growth forecasts.

Among other major currencies, the British pound GBPUSD �rose to $1.5734, from $1.5673 late Wednesday. Sterling came under pressure on Wednesday after minutes of the Bank of England�s February policy meeting revealed some dissenting views in favor of a larger round of quantitative easing.

The dollar extended losses against the Japanese yen USDJPY �to trade at �80.02 from �80.24 on Wednesday, when it broke above the �80 level to set a seven-month high, benefiting as U.S. debt yields rise.

Australian dollar

The Australian dollar AUDUSD �rose 0.7% to $1.0704, with the strong Ifo reading boosted overall risk appetite, noted Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets in London.

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The Aussie briefly came under pressure after Prime Minister Julia Gillard called for a leadership vote, setting up an expected showdown for the Labor party leadership with Kevin Rudd. Gillard pushed Rudd, a former prime minister, out of office in a 2010 leadership battle. Read more.

Gillard is favored to prevail.

�Whatever the case, although uncertainty is never welcomed by FX markets, this has been a dysfunctional minority government with the latest twist not likely to have policy ramifications,� Cole said, noting the opposition Liberals hold a significant lead over the current government in the polls.