The euro strengthened against the pound yesterday after an early-week rally between the two currencies, while the dollar dropped against both the European currency and the yen.

The euro stood at a level of 0.6801 against the pound at 09:30 GMT yesterday, stabilising again yesterday afternoon by trading at 0.6791.

RealTimeTraders noted was the currency's best performance against the sterling since last Thursday.

Meanwhile, Bloomberg reported that the dollar dropped to $1.3349 against the euro in New York yesterday afternoon, signifying a fall of 0.2 per cent.

The agency also noted a 0.2 per cent fall by the US currency against the yen.

The release of a positive German IFO Institute's business climate indicator prompted the rise of the euro yesterday.

It was the first rise for the indicator since the implementation of value-added tax, with analysts saying the future seems bright for German business, MarketWatch reported.

Nationwide reports about the impact of housing market problems on the American economy were blamed for the dollar's weak performance on Tuesday.

This morning, the euro traded at $1.3343, Dow Jones reported.