Mounting hopes that the US economy is set for a more vigorous recovery yesterday helped the dollar advance further against the euro.

Encouraging economic data from the US, combined with increasing expectations of an imminent rate cut from the European Central Bank, sent the euro back to $0.9929. Only two weeks ago some analysts were forecasting a rise above $1.03.

Even those who were sceptical that the US was due for a more sustained recovery said the dollar looked unlikely to fall in the short term. "It has been a day of forced liquidation of euro-dollar long positions," said Mr Paul Meggyesi, currency strategist at JP Morgan.

He said currency movements across the board were consistent with expectations of improved global growth.