Euro down to three-month low as business confidence drops in Germany

The euro was down to a three-month low as the Germany's leading indicator of business confidence, the Ifo index, reveals German business confidence declined sharply, in an additional signal that might prompt the European Central Bank to boost stimulus as soon as next month, Bloomberg reported.

The single currency was set for its third weekly decline against the dollar with concerns that  euro-sceptic parties would gain ground in elections to the European Parliament.

Sweden's krona fell to the lowest level since November against the dollar following a report that showed consumer and business confidence lagging predictions.

The Canadian dollar rose with the inflation increasing in April. Indonesia's rupiah suffered the biggest weekly loss this year as the election race tightened.

''A modest downside miss in the German Ifo index sparked some renewed selling interest in euro-dollar,'' Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, wrote in an e-mail. ''A close below the 200-day moving average would likely add some degree of bearishness for the trend-following community.''

Meanwhile Reuters reported that concerns over Sunday's EU election results destabilising some euro zone governments also weighed on the euro as the index hit its lowest level this year in May.

That put pressure on the euro, reinforcing expectations the ECB would ease policy sooner rather than later, according to Eric Viloria, currency strategist at Wells Fargo Securities in New York, Reuters reported.

Investors also cut euro holdings before EU election results due at about 2100 GMT on Sunday, according to traders. In the event fringe parties emerged strong, it would highlight the anti-euro and anti-austerity sentiment in countries like Italy and Greece that had regained market confidence.

Reuters reported Alan Ruskin, global head of G19 currency strategy with Deutsche Bank in New York as saying there were some concerns about the extremist parties gaining ground.

Meanwhile, the euro's modest losses boosted the dollar index. DXY, which tracks the greenback against a basket of major currencies, to its highest level in six weeks at 80.443 before easing to 80.364.