The euro moved higher against the dollar after a key survey on euro zone manufacturing activity came in above expectations and helped temper speculation that the European Central Bank will soon need to cut interest rates. The purchasing managers' index for the euro zone manufacturing sector rose to 49.9 in June from 48.7 in May, still showing a contraction but well above analysts' expectations for a more modest rise to 49.0. "For us, it proves that the ECB will remain on hold for the remainder of the year and will not cut the refi rate despite the recent speculation," said Gitzes Noorman of Rabobank. The data helped the euro recover some of the losses against the dollar seen overnight in the wake of last night's decision by the Federal Reserve Open Market Committee to raise US interest rates to 3.25 pct. "Euro/dollar has traded down through Thursday's worst levels to lows around 1.2029 before bouncing, helped by better euro zone data," said UBS analyst Daniel Katzive. The decision to hike rates was expected, but the market was relieved that the FOMC's accompanying statement confirmed that rates will continue rising at a "measured pace". The pound also rebounded against the dollar after reaching new nine-month lows earlier in the day following a spate of very disappointing UK data which has led most to call for a Bank of England rate cut in August. "After dropping six cents in five days, some corrective activity (in the sterling/dollar rate) ahead of the weekend is likely," said Mark Austin at HSBC.