The euro scaled three-week peaks against the dollar on Thursday as investors boosted their bets that the European Central Bank at next week's monetary policy meeting will flag the winding down of its vast bond-buying program by the end of this year.
Since hitting a 10-month low last week, the euro has gained nearly 3 percent against the dollar and is on track to post its largest weekly gain in four months.
The ECB's chief economist, Peter Praet, a close ally of President Mario Draghi, said on Wednesday the central bank at its policy meeting next week would debate whether to end bond purchases later this year. Other ECB officials echoed Praet's sentiment.
Jens Weidmann, the head of Germany's central bank, said on Wednesday expectations the ECB would taper its bond-buying program by the end of this year were plausible. Weidmann's Dutch counterpart, Klaas Knot, said there was no reason to continue a quantitative easing program.
The comments drove the euro on Thursday to $1.1840, the highest since May 17. It was last up 0.24 percent at $1.1801.
"Any signal next week that the bank plans to go ahead with winding down its asset purchases in the fall could add to the euros broadly improved tone," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
Some analysts have taken the comments from ECB officials this week as suggesting a decision on the stimulus is coming at the June 14 meeting.
"If the ECB wanted to counter expectations of an imminent policy announcement, it might already have said publicly that the market reaction has been unwarranted," said Capital Economics in a research note.
But all things considered, the research firm believes that the ECB will make some form of announcement on quantitative easing at next week's meeting. Others in the market, however, saw the comments as the starting point in a debate that will likely culminate in an announcement in July.
"The key point is that we think the ECB will favor waiting for further evidence from hard activity data that Q2 growth has rebounded from weak levels in Q1 before providing concrete guidance on QE," said Sam Lynton-Brown, FX strategist, at BNP Paribas.
The euro's gains have pushed the dollar index, a measure that is heavily weighted toward Europe's single currency, to a three-week low as well. The dollar index was last down 0.25 percent at 93.43.
Many, however, remain cautious ahead of a summit this weekend of the Group of Seven leaders, where U.S. President Donald Trump looks set to clash with his counterparts over trade.
"The trade stance of the U.S. administration worries economists because it could hurt business confidence that drives waves of investment and spending," said Juan Perez, senior currency trader at Tempus Consulting in Washington.