Europe's single currency is making a second attempt at a rally following a strong start and weak finish on Monday.

The currency, now in its second year of trading, gained against both the US dollar and the pound. At 1750 GMT one euro bought $1.0301 and £0.6287.

On Monday, the euro had been close to parity with the dollar when trading began.

Currency dealers remain uncertain whether the currency is now firmly on track for a rebound. When it was launched a year ago, one euro bought $1.17 but it has lost up to 14% of its value since.

Eurozone to grow?

Despite its weakness, Sweden and Denmark appear to be inching slowly towards joining the single currency.

A poll by a Swedish business newspaper suggests that almost two thirds of the country's economists believe that it is in Sweden's interest to join monetary union.

In Denmark, meanwhile, two influential members of the governing Social Democrats called on Prime Minister Nyrup Rasmussen to hold a referendum on euro membership no later than in September this year.

In both countries, those in favour of the euro now clearly outnumber the sceptics, a dramatic turnaround from 12 months ago.

Greece hopes to adopt the single currency at the end of 2001. That leaves the United Kingdom as the only EU country not to have expressed a clear interest in joining the euro.

Economic boost

The euro was given a boost by predictions from an influential German economic institute, forecasting a 3% growth rate for the eurozone economy during 2000.

The Deutsche Institut fuer Wirtschaft said the euro's weakness "isn't dramatic" and that it had helped stimulate exports, a key to growth in the 11 European Union nations using the euro.

Fighting talk

The euro's first rally of 2000 had been sparked by comments from Germany's finance minister Hans Eichel and European Central Bank president Wim Duisenberg.

Mr Duisenberg argued that the currency had the potential to appreciate, and his words were enough to drive the euro from near-parity with the dollar to a two-week high of $1.0185.

Germany's Finance Minister Hans Eichel chimed in, saying he was confident that an upturn in the European economy would boost the euro's exchange rate against the dollar.

Their words were bolstered by good economic data. The eurozone's purchasing managers index rose to 57.4 in December, the highest in its brief history, suggesting a strong economic recovery in the region.

Similar data from the eurozone's two biggest economies, Germany and France, confirmed the trend.

But later in the day, the euro weakened again - until a sharp fall in the US bond market gave it a boost in late trading in New York.