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The euro retreated from a two-month peak on Tuesday after a rally in the past two weeks, as climbing euro zone interest rates prompted speculators to bet on further gains in the currency.
The euro was also helped by buying against the Australian dollar.
The Australian dollar fell broadly after lower-than-expected consumer inflation data reinforced market expectations that Australia's central bank will be in no hurry to lift interest rates, though it cut much of its losses in late Asian trade.
Rising risk appetite helped to limit the fall in the Aussie dollar against the dollar.
Some market players remained sceptical about the chance of an ECB rate hike, thinking that concerns about highly indebted peripheral euro zone countries could tie the central bank's hands.
Still, as the euro continued to recover, the dollar index dangled near a 2-½ month low of 77.814 hit on Monday.
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