The pound rose to six-week highs against the dollar on Friday following stronger-than-expected British growth figures, while strong French consumer spending data pushed the euro higher as well.
The pound changed hands for US$1.8589 at 9pm, up sharply from 1.8486 in New York late on Thursday. The euro rose to US$1.2696, compared with US$1.2632 on Thursday. The dollar fell to ?116.14 from ?116.90.
New figures showed the British economy grew by 0.8 percent in the second quarter from the first, above forecasts for a more moderate 0.7 percent and the highest quarterly pace in two years.
The data come after a sharp pick-up in inflation, strong retail sales and robust figures on the British housing market, increasing the likelihood that the Bank of England will raise interest rates in the months ahead.
"Overall the GDP numbers represent yet another robust UK release this week and they underline our suspicions that interest rates will rise over the coming months," Philip Shaw at Investec said.
ABN Amro currency analyst Tony Norfield said that sterling was likely to be one of the currency trading stars in the near term.
This was due in part to the higher chance of a British rate hike and also to the possibility that oil producing countries could begin to diversify their currency reserves, he said.
The pound was also starting to breach key technical resistance levels, which could push it above 1.88 to the dollar, Norfield added.
The euro gained after French consumer spending data came in well above expectations, rising by 1.7 percent in June from May against a consensus forecast for a gain of just 0.2 percent.
Next week, traders are expected to focus on the IFO survey of German business confidence, which is tipped to drop after recently reaching 15-year highs.
Citigroup currency strategists said the European currency would still benefit from signs of recovery in the 12-nation eurozone.
"Corporate profits are strong. Firm equity markets and brisk activity in alternative assets, such as private equity, point to more dynamism at the micro level than has been apparent from the macro numbers. This activity should keep the ECB [European Central Bank] on a mild tightening cycle this year," they said.
The yen benefited from speculation that China could announce more flexibility to yuan-dollar trading, allowing the Chinese currency to appreciate further.
The People's Bank of China announced on Friday that it was raising the reserve requirement -- the amount of cash commercial banks must keep on deposit with the central bank -- by half a percentage point from Aug. 15.
The US dollar fell to 1.2361 Swiss francs at 9pm GMT, from SF1.2441 late on Thursday.
The greenback gained ground against the New Taiwan dollar in Taipei on Friday, increasing NT$0.010 to close at NT$32.750.
The US currency opened at NT$32.800 and fluctuated between NT$32.748 and NT$32.820.
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