Concerns about growth in the US and Japan sent the euro higher yesterday. The European single currency rose to three month highs at $0.90 against the dollar as US stocks buckled under the weight of an earnings warning from computer powerhouse Microsoft.

The single currency also rose against the yen overnight, hitting four-month highs above 101 yen as traders became increasingly pessimistic about Japan's recovery.

The euro's rally came despite a weak German Ifo business sentiment survey. Traders say the market is finally ready to start pushing the euro higher.

"People are bent on buying euro at this point," said Mr Jeff Yu, currency strategist at Sanwa Bank in New York. "It has failed to get above 90 US cents because people are taking profits, but still, there are finally some natural buyers of euro/dollar coming into market."

Weak economic data and losses in US stock markets kept the single currency well bid in US trade. US industrial output fell 0.2 per cent in November after dipping 0.1 per cent in October. Capacity utilisation declined to 81.6 per cent in November from 82.1 in October.

US real earnings dropped 0.1 per cent in November, compared with 0.2 per cent rise in October. A separate report showed the consumer price index rose 0.2 per cent in November, with core prices rising 0.3 per cent.

The news did little to cheer equity markets hit by a slew of dour profit warnings. But traders said extremely thin end-of-year conditions were making it difficult for the euro to extend its gains in the US session.

"There is no volume to speak of to bring it [the euro] up further. I've been here since 6 a.m. in the morning and all I'm doing is reading paper after paper," said Mr John Schein, trader at Fortis USA.