LONDON (AFX) - The euro firmed against most leading currencies in midday trade on short-covering and possible central bank intervention, dealers said.
Brian Martin, global chief foreign exchange strategist at Barclays Capital, said: "The euro sold off quite heavily this morning and the inter-bank market got itself quite short."
Dealers said rumours were circulating that the Bundesbank was among various central banks in the market buying euro.
Whether the Bundesbank was operating for commercial reasons or whether it was trying to stem the slide in the euro was unclear, they said.
Chris Furness, senior currency strategist at 4CAST, said: "Selling stopped at the same time as we saw the Bundesbank buying of euro around the 0.9080 usd level. This has been enough to push the euro higher.
"We saw a huge amount of euro selling which may well have been related to the completion of an M&A deal, which could explain why the dollar has performed so well in the face of stocks crashing," he added.
Sterling firmed against the dollar as a reflection of the euro/dollar bounce, dealers said.
Data on UK earnings showed headline average earnings unchanged from the December rate at 4.4 pct and below the Bank of England's 4.5 pct comfort level. Consensus was for January headline earnings to have risen 4.6 pct.
The UK claimant-count jobless total fell by a seasonally adjusted 10,600 in February to 996,200, representing the lowest claimant count jobless figure since December 1975.
Commenting on the figures, Martin said: "Earnings data were consistent with the BoE's view that it is not threatening the 2.5 pct inflation target. Looking at the economy alone sterling should be a very strong currency."
However, he said that because of the likelihood of an aggressive debate about possible membership of European Monetary Union, investors had been shying away from investing in sterling.
"That is what has been negating the very positive UK economic data."