The euro inched up yesterday, supported by higher European shares, but gains were limited as traders were awaiting data on European manufacturing activity.

A weak reading of US consumer confidence kept a lid on risk appetite and helped to keep the euro away from a three-week high touched against the dollar at the beginning of the week.

The euro advanced to $1.4076. The dollar index, which tracks its performance against a basket of currencies, was essentially flat at 80.100. The pound pared its decline against the dollar, trading little changed at $1.6449 in London after weakening to $1.6385. The British currency fell 0.4 per cent against the euro to 85.56 pence.

In Asia, the yen declined to a two-week low against the euro after a report showed China's manufacturing expanded for a fourth month, increasing demand for higher- yielding assets amid confidence the global recession is easing.

The yen also fell against the dollar, Swiss franc and the pound. The Australian dollar gained versus the yen and the dollar after a report showed the nation's retail sales climbed for a third month.

The yen weakened to 136.35 per euro in London from 135.21 earlier in New York. It depreciated to 96.85 per dollar. The Japanese currency has lost 7.1 per cent against the euro and 6.4 per cent versus the dollar this year.

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