Euro prolongs recovery against dollar

In morning London deals, the European single currency rose to $1.4765 from 1.4737 in New York late on Wednesday.

Against the Japanese currency, the dollar dropped to 109.08 yen from 109.47.

The euro climbed further away from six month lows of below 1.46 dollars, reached on Tuesday in the wake of downbeat consumer confidence and business sentiment surveys in Germany, Europe’s biggest economy.

"Anticipation of a quick rate cut by the ECB now seems to be fading on the back of comments by bank members and this has helped lift the euro away from recent dollar lows," said CMC Markets analyst James Hughes.

The euro has been buoyed by comments from European Central Bank policymaker Axel Weber, who indicated the bank was unlikely to lower interest rates any time soon.

Up to now, markets have been expecting rate cuts from the ECB and hikes from the U.S. Federal Reserve to narrow the rate differential in the two regions.

The dollar was also being pressured by a fresh rise in oil prices on concerns that Tropical Storm Gustav could hit oil and gas installations in the Gulf of Mexico, dealers said.

Market players were looking ahead to another batch of U.S. economic indicators, including second-quarter economic growth and a home price survey due Thursday.

Dealers said the greenback could get a boost from the snapshot of economic second-quarter growth amid hopes it would be revised upwards from an earlier estimate of 1.9 percent.

But the market impact was unlikely to be huge as the growth figures were considered a lagging indicator, they added.

Meanwhile a report by the Japanese Nikkei business daily that the U.S., European and Japanese authorities drew up an emergency plan in March to rescue the plunging dollar brought some relief to markets, dealers also said.

In the event no joint intervention took place.

But the report "suggests a more stable dollar in the long run, which should help keep overall foreign exchange market volatility low" and encourage risk appetite, a Tokyo trader told Dow Jones Newswires.

Elsewhere on Thursday the British pound remained close to two-year lows versus the dollar as a survey from the Nationwide bank revealed that house prices continued to slump in August.

"The sharp decline in house prices persisted into August as weak buyer confidence and tight lending criteria continued to weigh on the market," said Capital Economics analyst Seema Shah.

In London trading on Thursday, the euro changed hands at $1.4765 against 1.4737 late on Wednesday, at 160.92 yen 0.8030 pounds and 1.6136 Swiss francs.

The dollar stood at 109.08 yen and 1.0937 Swiss francs.

The pound was at $1.8377.

On the London Bullion Market, the price of gold increased to $832.75 per ounce from $827 late on Wednesday.