That pushed the single currency to its weakest in more than a week against the dollar. The euro's biggest falls, though, were against sterling, which was boosted by a surge in UK inflation and as US-based Kraft Foods Inc agreed a recommended deal to buy Cadbury for around 11.9 billion pounds ($19.6 billion), creating the world's largest confectioner.
"The market has reacted to the ZEW data and the euro has moved lower, but we are still in a very technically driven market, with price action driven by day-to-day news," said Peter Wuyts, currency strategist at KBC in Brussels. By 1220 GMT, the euro fell 0.6 percent against the dollar to $1.4290, having fallen to $1.4282, its lowest since January 8. It also fell against the yen to 129.80 yen. Against sterling, the single currency dropped to 87.30 pence, while the pound hit a six-week high against the dollar of $1.6459.
The yen gained against the dollar, hitting a 4-week high of 90.32 yen, according to Reuters data, after Japan Airlines filed for bankruptcy protection as expected, owing more than $25 billion. Traders said the bankruptcy of JAL may lead to yen repatriation as the company may have to liquidate some of its dollar-buying derivative contracts or repatriate overseas assets, helping the currency.
But the euro's losses against the dollar and a lack of large follow-through yen buying helped push up the dollar to a session high of 90.89 yen, traders said. The dollar index, a gauge of the greenback's performance against six major currencies, rose 0.5 percent to 77.505.
The Australian dollar fell 0.7 percent to $0.9192 as China's central bank stepped up efforts to tighten liquidity by lifting auction yields on one-year bills for the second week in a row. Any slowdown in Chinese growth is seen hurting Australian assets. The Canadian dollar fell 0.3 percent to C$1.0291 ahead of a Bank of Canada rate decision at 1400 GMT, when the central bank is expected to hold fire.