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Euro hits $1.31 for first time since May (AFP)

LONDON (AFP) – The European single currency breached 1.31 dollars for the first time since May on Thursday, boosted by US economic concerns and upbeat eurozone data, traders said.

At about 1338 GMT, the euro rallied as high as 1.3107 dollars, reaching a level that was last seen on May 4.

"Some of the recent downward pressure has lifted from the euro, while the persistently grim US economic data and downbeat comments from the Fed means the dollar is struggling," said GFT analyst David Morrison.

The euro was boosted by news of soaring eurozone confidence, lower-than-expected German unemployment, improving Italian business confidence and higher Spanish housing permits.

Business and consumer confidence in the 16-nation eurozone jumped in July to its highest level in more than two years, driven by regional powerhouse Germany, the European Union said Thursday.

The Economic Sentiment Indicator (ESI) produced by the European Commission rose to 101.3 points in the single currency area, an increase of 2.3 points from June and the highest level since March 2008.

Sentiment also improved across the 27-nation European Union, rising by 1.9 points to 102.2 points.

"Economic sentiment has hit a 28-month high and German unemployment came in lower than expected," added Morrison.

"This follows on from a raft of strong data from across the eurozone at the end of last week.

"While this helps to give the region some breathing space from its ongoing sovereign debt worries, if the euro continues to strengthen, then the data could start to reverse very quickly.

"After all, it is Germany's manufacturing and export strength which remain the driver for the European economy."

A stronger euro makes German products more expensive for buyers that use the dollar, which therefore tends to hurt Germany's manufacturing sector.

The dollar weakened on Wednesday after US durable goods orders fell for a second consecutive month in June, while the Fed warned that the "modest" economic recovery was slowing in some parts of the United States.

The "modest" recovery is slowing in some parts of the country, the Federal Reserve said in its latest Beige Book report on Wednesday.

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