The euro rose to session highs against the broadly softer dollar on Thursday as dovish comments by Federal Reserve Chair Janet Yellen curbed investor demand for the greenback.
EUR/USD touched session highs of 1.3864 and was last up 0.29% to 1.3856.
The pair was likely to find support at 1.3802, Wednesday’s low and resistance at 1.3875.
The dollar softened after Fed Chair Janet Yellen said Wednesday that monetary policy will need to remain accommodative for some time, citing slackness in the labor market and low inflation.
Ms. Yellen said the risks of persistently low consumer prices outweighed those of high inflation. She added that the central bank expects the U.S. unemployment rate to fall back between 5.2% and 5.6% by the end of 2016. The U.S. unemployment rate currently stands at 6.7%.
In the euro zone, data on Thursday showed that German producer price inflation fell 0.3% in March from a month earlier and was down 0.9% on the year. This was below expectations for a 0.1% increase on the month and a 0.7% decline on the year.
The report came a day after data confirmed that the annual rate of euro zone inflation slowed to 0.5% in March, the lowest since November 2009.
Core inflation, which strips out volatile items like food and energy costs, fell to 0.7% from 1.0% in February, matching the record low reached in December 2013.
Euro zone inflation has now been in the European Central Bank's danger zone of below 1% for six straight months, fuelling speculation that policymakers will need to implement fresh stimulus measures to shore up the fragile recovery in the euro area.
Over the weekend, ECB President Mario Draghi that further gains in the euro would trigger additional monetary easing to keep inflation from falling.
'A strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for our price stability,' he said.
The euro was also higher against the yen, with EUR/JPY rising 0.24% to 141.57 from 141.22 on Wednesday.
Elsewhere, the euro recovered from six-week lows against the pound, with EUR/GBP rising 0.22% to 0.8244.
Demand for sterling continued to be underpinned after data on Wednesday showed that the U.K. unemployment rate fell to a five year low of 6.9% in the three months to February, bolstering expectations for a rate hike by the Bank of England in the first quarter of next year.