Dollar loses ground against euro

The euro surged to $1.3086 against the dollar, with many other currencies following suit.

Sterling rose almost 1% to $1.93, the yen hit a two-month high and Russia's rouble rose to a seven-year high.

Analysts have voiced concerns about the US economy after the White House downgraded its growth forecasts amid a sharp slowdown in the housing market.

Meanwhile, expectations that the European Central Bank is once again about to raise interest rates gave a lift to the euro.

Recent figures showing an unexpected rise in German business sentiment - its seventh quarterly rise in a row - also helped. So did French data showing that business confidence held at five-year highs in November.

However, traders added that thin trade as a result of the US Thanksgiving holiday might have benefited the euro.

"For the time being, the news flow is favouring the euro. If we close above $1.30 today, the key will be if we reject all of this as a Thanksgiving phenomenon or not," said Ian Gunner, head of foreign exchange research at Mellon Bank.