The euro held steady near its highest in more than a year against the dollar on Thursday, after solid euro zone business activity data and ahead of euro zone wage numbers that will shape the path of interest rates for the European Central Bank.

The euro was flat at $1.1146, just shy of the $1.11735 reached on Wednesday, its firmest since July 2023.

It has been supported in recent weeks by weakness in the dollar as a dovish Federal Reserve and fresh signs of weakness in the U.S. job market back the case for interest rate cuts.

European developments will be in focus for the euro on Thursday. The common currency fell after a preliminary survey showed German business activity contracted in August for a second consecutive month and by more than expected, but rebounded after euro zone wide data showed surprising strength.

Up next is wage growth data for the currency bloc due at 0900 GMT which will guide expectations of upcoming European Central Bank policy, and hence the euro's direction.

The pound was steady at $1.3095, having hit $1.31195, also a 13-month high, the previous session, and the dollar was 0.15% firmer on the yen at 145.46.

That left the dollar index , which measures the currency against the euro, sterling, yen as well as three other peers, up 0.1% at 101.22.

The index dipped to 100.92 on Wednesday for the first time this year, softening as markets become more confident the Federal Reserve is on track for rate cuts starting in September.

Traders now price in a 38% probability of a 50 basis point (bp) cut at the Fed's Sept. 17-18 meeting, up from 33% a day earlier, and are fully pricing a 25 bp reduction, according to the CME Group's FedWatch Tool.

Elsewhere, the Swiss franc was somewhat firmer, with the dollar down 0.16% at 0.8504 francs and the Australian dollar was flat at $0.6745.

Source : Reuters