(Bloomberg) -- The euro approached its strongest level against the dollar in nearly two months as risk sentiment improved and higher-than-estimated German inflation underpinned the outlook for rates in Europe. 

The euro jumped as much as 0.8% to $1.0926 on Thursday, just below $1.0930 reached on March 23, the highest since early February. The dollar was broadly weaker against peers as US stocks extended gains on bets that a peak in interest rates is near and bank turmoil will ease further. 

While Germany’s inflation slowed thanks largely to tumbling natural gas costs, it came in above forecasts, adding fodder for wagers on European Central Bank rates. That played out in bond markets, notably a push higher in German yields, with rates on policy sensitive two-year notes climbing as much as 14 basis points to just shy of 2.8% and a two-week high.

The common currency set a fresh year-to-date high versus the offshore yuan and rose to its highest level since August 2021 against the Australian dollar. The Bloomberg Dollar Spot Index is down 0.4%, reversing Wednesday’s gain and poised for the lowest close since Feb. 2. 

--With assistance from George Lei and Robert Fullem.

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