Increased wariness of central bank intervention was also keeping the euro well above its all-time troughs, as dealers said central banks could be tempted to accelerate its move giventhe improved market sentiment for the single currency.

Traders remained, however, wary about the near-term prospects for the euro, sayinmg it was being supported mainly by short-term covering of euro positions rather than long-term investment flows. "Last week's GDP data showed that the US economy is not improving any more and the dollar could be close to the top," said Lukas Krattiger, head of foreign exchange trading at Citibank in Zurich.

"But the euro is not yet out of the woods. We have not seen the big buyers in the market as yet."

By 1053 GMT the euro had firmed to $0.8490, its highest level since October 18, but still below the level at which the Group of Seven leading nations intervened on September 22 to support the beleaguered single currency. The euro was up more than one per cent from Friday's late North American levels and more than two cents from last week's record low around $0.8225, according to Reuters data. Against the yen, the euro firmed above 92 yen for the first time since October 20, coming within half a yen of two-week peaks around 92.60 yen. The euro was up around 2.5 per cent from record troughs around 88.80 yen last week. Data released earlier on Monday showed Italy's consumer inflation rose 2.6 per cent in the 12 months to October, above expectations, but the market impact was limited.

Euro's on firmer footing, but for how long?

The euro began to make ground across the board last week after US gross domestic product report showed third-quarter growth slowed more than expected to an annualised 2.7 per cent from 5.6 per cent in the second quarter.

Despite the figures, analysts said the US economy was well positioned for a soft-landing, which would help maintain the attractiveness of US assets and the dollar.

"The euro is enjoying some reprieve after the US GDP came in below expectations, but I am not convinced that the euro can sustain this rally," said Neil MacKinnon, senior currency strategist at Merrill Lynch in London. "I don't see the GDP figures breaking the underlying uptrend in the US dollar. What we are seeing is a rather more moderate growth rate and we will not get a hard landing. It's likely to be a soft-landing, which is positive for the dollar as we are not likely to see a significant turnaround in capital flow out of the US."

Meanwhile, the market largely brushed aside remarks by European Central Bank President Wim Duisenberg, who said at the weekend the euro has brought stability to foreign exchanges.