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By Luciana Lopez
January 3, 2012 3:42 PM EST
Better-than-expected U.S. and European data, as well as hopes the U.S. Federal Reserve could ease monetary policy further, boosted the euro and stocks on Tuesday, even as tensions between Iran and the United States lifted oil prices.
Minutes from the Fed noted that several officials believed economic conditions could "well" warrant a further easing of monetary policy.
Later this month the Fed will begin issuing policymaker forecasts for its benchmark interest rate and when officials expect the first rate rise to occur.
The euro hit a session high as the minutes were released, advancing to $1.3076 before paring gains to 1.04 percent, or $1.3062, above its 2011 trough of $1.2858 hit last week on trading platform EBS.
The Fed minutes came after earlier data showed the pace of growth in U.S. manufacturing accelerated in December to its fastest since June, while a sharp drop in German joblessness to the lowest in two decades helped the euro and fuelled stock market gains on both sides of the Atlantic.
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"The euro's gains are a combination of both earlier momentum stemming from economic data and the headlines from the FOMC minutes," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"The dollar was already on the defensive today, but the minutes in my opinion do suggest that the Fed is still open to easing monetary policy, which is negative for the dollar."
Asian markets rose after data showed that China's big manufacturers narrowly avoided a contraction in December, though downward risks persist.
European stocks closed at their highest in five months on Tuesday. The FTSEurofirst 300 index of top European shares ended the day up 1.59 percent.
Data showed German unemployment fell more than expected in December, with the jobless rate falling to the lowest since the unification of Germany.
U.S. stock indexes rallied sharply, hitting multi-month highs. The Dow Jones industrial average climbed as much as 2.15 percent, hitting its highest since July, before paring gains to 1.8 percent. The Nasdaq Composite Index added 1.95 percent. The Standard & Poor's 500 Index gained 1.86 percent after having notched its highest intraday level since late October.
Another report showed U.S. construction spending surged to a near 1-1/2-year high in November.
The data added to growing hopes that a recovery in the U.S. economy, the world's largest, could be gaining steam.
U.S. Treasuries prices fell in thin trading as investors cashed in year-end gains. The safe-haven appeal of U.S. government debt diminished after the December factory report.
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