The rose to its highest in four years against the yen and a near one-month peak versus the dollar on Wednesday after Germany's two major parties reached a deal on forming a grand coalition.
German Chancellor Angela Merkel's conservatives clinched a deal with the Social Democrats in the early hours, triggering a relief rally for the euro. A new government should be formed before year-end.
The euro was also supported by a survey showing German consumer sentiment at a six-year high. This followed unexpectedly robust Ifo business sentiment figures issued last week.
Currencies
The euro last traded up 0.1 percent at $1.3578, below an earlier high of $1.3612, its strongest since Oct. 31.
The single currency rallied against Japan's currency, rising as high as 138.80 yen, giving it the potential to target the 2009 peak of 139.26 yen. It last traded at 138.58 yen, up 0.8 percent on the day.
Meanwhile, the dollar also rallied against the yen on higher U.S. Treasury yields and month-end positioning. Treasury prices, which move inversely to yields, fell as data suggested further healing of the labor market.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week. While the jobs picture is brightening a bit, factory activity appears to be losing momentum, with business spending on capital goods weakening and new orders for long-lasting manufactured goods falling last month.
Separate data showed U.S. consumer sentiment rose in November as wealthier Americans' outlook on the economy improved. Additionally, a measure of future U.S. economic growth rose to a nine-week high while the annualized growth rate also gained.
The , which tracks the greenback against a basket of six major currencies, last traded 0.1 percent higher at 80.674. The dollar reached 102.18 yen, its highest since May 29. It last traded 0.8 percent higher at 102.08 yen, according to Reuters data.