LONDON, July 27 (AFP) - The dollar surged to multi-week highs against the euro on Tuesday after extremely strong US consumer confidence data cemented expectations of a self-sustaining recovery in the world's largest economy.
The single European currency fell to 1.2050 dollars from 1.2142 late on Monday in New York.
The dollar climbed to 111.10 yen from 109.94 on Monday.
The Conference Board said US consumers grew increasingly confident in July on the back of an improved jobs outlook, despite a weaker than anticipated payrolls report for June.
Its main index jumped to a two-year high of 106.1 in July from a revised 102.8 in June and expectations of a flat reading of about 102.
"This report suggests the recovery is increasingly being felt at the grassroots level and provides further evidence that the June slowdown in jobs growth was likely temporary," said John Ryding, an analyst at Bear Stearns.
Tuesday's data added credibility to US Federal Reserve Chairman Alan Greenspan's assessment last week that the recent batch of weak economic data was merely a blip.
"This proves that Greenspan was right that the soft spot in the June data was temporary," said Neil Mackinnon, chief economist at ECU Group.
The tussle between the dollar bulls and bears, which has dominated the currency markets for the last three or four months, may now be turning in favour of a stronger dollar, he added.
"It's looking very positive for the dollar to establish the beginnings of a new primary uptrend," said Mackinnon.
The renewed optimism pushed the euro down 1.3 percent to its lowest level since June 18, while the dollar headed back up to the 111-yen level for the first time since mid-June.
Greenspan's optimistic testimony boosted expectations that the central bank will carry on raising the cost of borrowing by a quarter point at its upcoming rate-setting meetings, the next one of which takes place on August 5.
Though the Fed switched gears last month by raising short-term interest rates by a quarter point from 46-year lows of 1.00 percent in a first step to head off inflation, concern about the pace of the US recovery heightened expectations that upcoming rate increases would not be aggressive.
Earlier, the euro had been buoyed by an encouraging survey into German business sentiment from the Ifo research institute.
Ifo's main business climate index rose to 95.6 in July from 94.6 in June and expectations of a more moderate rise to 95.2. Meanwhile, the July business assessment index rose to 94.1, up from 93.2 in June.
The euro was changing hands at 1.2050 dollars from 1.2142 late on Monday in New York, 133.82 yen (133.47), 0.6617 pounds (0.6594) and 1.5373 Swiss francs (1.5351).
The dollar stood at 111.10 yen (109.94) and 1.2757 Swiss francs (1.2640).
The pound was at 1.8221 dollars (1.8402), 202.37 yen (202.29) and 2.3245 Swiss francs (2.3270).
On the London Bullion Market, the price of an ounce of gold stood at 392.25 dollars from 391.65 dollars late on Monday.