"The euro's reaction highlights the heightened sensitivity of the currency towards any good news from Europe after recent lacklustre data," said Kamal Sharma, director of G10 FX strategy at Bank of America Merrill Lynch in London. A bunch of weak data since January has undermined support for the single currency, prompted investors to revise down their inflation expectations for the coming months and pulled core bond yields lower. A Citibank economic surprise index shows the eurozone indicator is still wallowing near six-month lows hit last month.
Morgan Stanley's ETF tracker indicates purchasing of euro zone equities on a FX hedged basis has grown to its highest levels since August 2015, a sign of growing bearishness on the single currency. Elsewhere, the Australian dollar tumbled after customs officials at China's northern Dalian port banned imports of coal from major supplier Australia, just days after the central bank stepped back from its long-standing tightening policy bias.
The indefinite ban on coal imports from Australia, effective since the start of February, comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days. The Aussie fell one percent to $0.7086 in a volatile Asian trading session before retracing some losses to stand 0.7 percent down on the day.
Broadly, the dollar index, which measures the US unit against a basket of six major currencies, added 0.11 percent to 96.559 after minutes from the Federal Reserve's last meeting revived expectations for a US rate hike this year.