The euro hit an 11-week high against a broadly weak dollar as month-end demand for the single currency helped push it above a key barrier.

Market participants said demand for euros from an Asian central bank in early European trade had sparked wider demand for the single currency, helping push the dollar to a three-month low versus a currency basket.

Gains in the euro helped push the dollar .DXY down to 81.596 versus a currency basket, its weakest since late April.

Data showing a slide in Germany's jobless rate in July and a rise in euro zone economic sentiment this month also helped to support the single currency.

Against the yen, the euro rose around 0.4 percent to a session high of 114.21 yen according to Reuters data, recovering from early losses and edging back up toward 114.74 yen struck on EBS on Wednesday.

The euro slipped in Asian trade due to month-end selling by Japanese exporters, Tokyo-based traders said, adding that more offers may emerge if the euro rises toward 115 yen.

Some in the market said California Governor Arnold Schwarzenegger's announcement that the state was in a state of emergency over its finances was another reason to dump the dollar as it highlighted the fiscal problems in the country.

Analysts said investors who had been wary of buying the euro before last week's bank stress test results were picking up the single currency again before the month ends, while ongoing short covering would also work in the euro's favor.

At the same time, Citi analysts said investors would sell dollars before the end of the month to hedge the currency exposure on their holdings of U.S. assets.

In a note, they said investors continued to buy U.S. equities into the end of July as U.S. stock markets outperformed the rise in other global equities.

Analysts said that despite a run of weak U.S. economic data, ongoing optimism about second-quarter corporate earnings would add to the view of an improving global economy and support shares, keeping euro demand intact.

The New Zealand dollar rose 1.0 percent to $0.7286, recovering from an earlier fall after the central bank raised interest rates by a quarter point, as widely expected, but warned that further hikes could be more gradual.

The New Zealand dollar's recovery was aided by a rise in the Australian dollar, which climbed more than 1 percent to $0.9038, nearing an 11-week high hit earlier in the week.

Source BBCB