The euro surged on Tuesday, dusting off the earlier worries about a major downfall in its value.
The boost comes after positive news coming out of Ireland and by a hefty purchase by at least one major U.S. bank. The euro had dropped to a six month low on Monday amid concerns about the European economy and the uncertainty around Japanese interest rates.
The euro had climbed to $1.3786 by mid-morning in New York, up from $1.3689 late on Monday. The euro rose to 114.85 yen from 114.20 yen.
Many factors have contributed to the euro's rise of fortunes. There has been an increase in the euro-zone purchasing managers' index for service industries, which moved up to 54.1 from 53.8. The currency also received a major relief in the form of a $1 billion purchase against the dollar by one major U.S. bank.
Moody's warning about Ireland's credit rating downgrades and the country's precarious political situation did not impact the euro as was expected by some financial experts. The yen has also sustained the recent dip in interest rates by the Bank of Japan and the ease of monetary regulations in the economy. The Reserve Bank of Australia has also announced that it will not change its interest rates for the fifth consecutive month.
The dollar dropped to 83.28 yen from 83.42 yen. The dollar is struggling after Fed Chairman Ben Bernanke hinted at easing of regulations to bolster economy. Quantitative easing is expected in November thus rising speculations about the US economy.
