By Tommy Wilkes
LONDON (Reuters) - The euro rebounded from 2-1/2 month lows on Thursday as currencies hit hard by recent dollar buying roared higher, with the mood for risk-taking starting the month on a much more positive footing.
Analysts said a flood of end-of-month buying of dollars on Wednesday had ceased with the start of November.
That, combined with hopes that China would ramp up fiscal stimulus, boosted the euro and led to substantial moves higher in the Australian and New Zealand dollars, the Norwegian and Swedish crowns and a clutch of emerging market currencies.
A more than one percent increase in sterling
"We are doing the opposite from what we were doing yesterday. We've got a reasonably risk-friendly market, and with the new month we have some dollar selling," said Kit Juckes, a strategist at Societe Generale (PA:SOGN).
The euro rose to as high as $1.1389 (EUR=), away from recent lows of $1.1302 that had followed weak euro zone data and worries about the Italian budget.
The dollar index (DXY), which measures the greenback's value versus six major peers, moved lower by 0.5 percent to 96.642, easing from a 16-month high of 97.2 hit on Wednesday.
The Australian dollar
The New Zealand dollar gained 1.4 percent
The yen
EM RECOVERY
With investor risk sentiment improving, emerging market currencies racked up gains versus the dollar. The offshore Chinese yuan, which had skidded to a 22-month low this week, recovered nearly half a percent to 6.9456
The Russian rouble (RUB=), Turkish lira
Despite the dollar's slide, some analysts were cautious about further falls given the headwinds for the global economy.
Friday's U.S. employment data could also reinforce the view that the U.S. economy is outperforming rivals, sending money back into the buck.
"After a very difficult month of October for risk assets, overnight we saw across the board strength in EM (emerging market) and higher beta FX, partly helped by the announcement of Chinese stimulus," ING analysts said in a note to clients.
"Yet, with the combination of ongoing overhang of trade wars, the tightening Fed and the U.S. economy outperforming its G10 peers, we don’t expect such across-the-board EM FX rallies vs USD to be longlasting."