Better US economic data failed to help the dollar in late London trading Friday, as analysts increasingly concluded that the market was over-optimistic about the US economy's second-half prospects.
The single European currency rose to US$1.1518 from US$1.1474 late on Thursday in New York.
The dollar fell to Japanese Yen 118.86 against Japanese Yen 119.20 on Thursday.
"I think it's a matter of too much good news being priced in too soon. I think what the market would like to see is a significant outperformance" on the US data releases, said Andre de Klerk, currency strategist at the ECU Group.
US June durable goods orders came in 2.1 percent better than in May, against the consensus forecast of US economists for a 1.3-percent rise.
New and existing home sales data for June were also solid, with new home sales rising to a new record high.
Yet this was not enough to help the dollar, as the euro broke decisively above US$1.15 to its highest levels this week.
"The most important thing right now is that good growth in the second half is very much fully expected by the market now," said David Mann, strategist at Standard Chartered.
In order to truly give the dollar a lift, data will have to really come in on the strong side, and US stocks will have to rally, analysts said.
"Absent a really good rally in US stocks, it's hard to see why the dollar would not keep weakening," Mann said.
The fact that the dollar has declined after the improved US data -- on top of an unexpectedly large drop in weekly jobless claims Thursday -- is "firm confirmation from the market that the good news for the dollar has been priced in and to an extent overestimated," ECU Group's de Klerk said.
De Klerk said the euro could hit US$1.1625 within the next week.
He cautioned, however, that summer is often a difficult period to forecast currencies, given thinner trading conditions. This makes volatile movements a bigger risk.
Meanwhile, the pound was unfazed by a disappointing second-quarter British economic growth report, marking gains against the dollar in tandem with the euro.
British GDP grew 0.3 percent in the second quarter from the previous quarter, against expectations of 0.4-percent growth.
Nevertheless, Britain is likely to continue outpacing euro-zone economies this year, leaving its interest rates higher and more enticing to global investors, analysts said.
The euro was changing hands at US$1.1518 from US$1.1474 late on Thursday in New York, Japanese Yen 136.73 (Japanese Yen 136.40), UK Pound 0.7103 (UK Pound 0.7096) and 1.5457 Swiss francs (Sf1.5431).
The dollar was being quoted at Japanese Yen 118.86 (Japanese Yen 118.90) and 1.3437 Swiss francs (Sf1.3448).
The pound was at US$1.6199 (US$1.6165), Japanese Yen 192.58 (Japanese Yen 192.20) and 2.1763 Swiss francs (Sf2.1739).
On the London Bullion Market, the price of an ounce of gold stood at US$363.0 compared with US$357.30 on late Thursday afternoon.