German data perk up euro, while dollar has off day

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The dollar fell to a fresh one-month low against the euro on Thursday in thin trading, as investors tested key resistance levels in the euro zone currency on a day when sentiment on the greenback was gloomy after less upbeat U.S. economic data.

The euro hit a high of $1.3295, the highest since June 20. The euro was last at $1.3291, up 0.7 percent on the day.

The dollar also fell to a session low against the yen of 99.04 yen, down roughly 1.2 percent on the day.

The euro was up after an earlier German Ifo survey showed business morale was slightly better than expected. The influential think tank's business climate index rose to 106.2 in July from 105.9 a month ago, just ahead of forecasts of a 106.1 reading.

The euro waxed and waned after the news but picked up momentum as U.S. buyers entered the market.

The New Zealand dollar rose to a one-month high as investors detected a more hawkish tone from the Reserve Bank of New Zealand.

(Read more: Warning: A 15% drop in US dollar may be coming)

The euro is "generally supported by recent strength in euro zone economic data that has signaled stabilization in the 17-member bloc's economy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"Yesterday's much stronger than expected euro zone PMI data signaled that the bloc's economy may have bottomed, while overnight, German Ifo business morale also topped market forecasts."

(Read more: By staying coy on Germany, US is failing the euro zone)

Sterling was last up 0.7 percent at $1.54159, after data showed the British economy grew 0.6 percent in the second quarter, picking up from the previous quarter for an a 1.4 percent annual pace.

On sterling trading activity "currency traders were clearly looking for more given the recent string of upside economic surprises," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York.

The Bank of England is expected to issue 'forward guidance' next month that it will keep rates low to support growth.

Despite Thursday's moves, the dollar's upward trend is expected to continue. The dollar has shown a high correlation to Treasury yields in recent weeks as the market has focused on when the U.S. Federal Reserve might start tapering its monetary stimulus.

(Read more: Durables surge past expectations; jobless claims tick higher)

A report showed that, in dollar terms, the headline durable goods orders total of $244.5 billion has finally regained a record level, surpassing the previous peak of $242.96 in December 2007, the month the United States entered recession.

Durables orders troughed in April 2009, two months before the recession ended, at $144.4 billion and have risen more than $100 billion from that low.

(Read more: The trade that has plenty of 'juice' in it)

The New Zealand dollar was last up 2.1 percent at US$0.8092, after hitting a one-month high of $0.8100 as investors detected a more hawkish tone from the Reserve Bank of New Zealand.

(Read more: We can't influence 'currency war': New Zealand finance minister)

"There was a lot more emphasis on the potential inflation spillover from construction costs and housing market," said Jane Turner, a senior economist at ASB Bank in London. "We still expect the RBNZ to first lift the official cash rate in March 2014."

If that prediction proves correct, New Zealand could be the first developed nation to begin a rate tightening cycle.

—By Reuters.