The euro hit the day's high against the dollar and bund futures erased gains on Friday after a surprisingly strong reading of German business confidence.

Germany's Ifo institute said its business climate index rose to 106.2 in July, much higher than forecasts for 101.6. The business expectations index came in at 105.5 versus expectations for 101.6.

The euro EUR= rose to the day's high of $1.2939 according to Reuters data, from around $1.2884 before the announcement.

German bund futures FGBLc1 erased gains to hit a session low at 128.61, down 8 ticks on the day. German bond yields, which move inversely to prices, rose across the curve with the two-year DE2YT=TWEB up 1.7 basis points at 0.716 percent.

(Reporting by London Treasury Team)