The euro rose against the dollar and yen after a successful Portuguese bond auction soothed nerves about European banks and increased risk appeitte.

The bond aution also calmed worries earlier in the week about the European bank stress tests which had not fully disclosed some of the bank's exposure to sovereign debt.

The dollar managed to reduce losses agains the euro after the Fed warned that economic growth is slowing.

The Federal Reserve's Beige Book, which gives a snapshot of economic conditions, suggested the US economy continued to grow between July to the end of August, but with "widespread signs of a deceleration".

The greenback recovered from a 15-year low against the yen with ongoing speculation that the Japanese government might intervention in the yen's rise if the dollar moves closer to 80 yen.

Sterling recovered from a six-week low against the dollar after positive housing data encouraged a round of buying.

House prices creeped higher in August, according to data from mortgage lender Halifax, confounding expectations of a decline.

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