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The euro jumped about 0.5 per cent to $1.3065 and moved further away from Monday's low of roughly $1.2983, reports Reuters.
It tumbled to $1.2944 last week, its lowest point for 11 months.
Crucial to this improvement was the German Ifo index, which found business morale in the country has risen sharply in December despite predictions it would fall amid bad news about the European sovereign debt crisis.
The Ifo index could mean good news in the build-up to Christmas as Germany counters the European downturn, said president of the Ifo Institute Hans-Werner Sinn.
Rainer Sartoris, an analyst at HSBC Trinkaus, told the news provider the data revealed an undercurrent of confidence in the German economy.
"The first and second quarters of 2012 will be weak but we expect the German economy to pick up in the course of the year," he added.
Posted by Greg Secker
