LONDON: The euro recovered Wednesday on positive eurozone business data and after being hit by strong US economic data and worries about problems in the European banking sector.

The foreign exchange market was also awaiting the outcome of the US Federal Reserve's latest monetary policy meeting.

In London morning deals, the single currency rose to 1.4560 dollars, up from 1.4534 in New York late on Tuesday, when it had struck 1.4506 dollars -- the lowest level since October 2.

Against the Japanese currency, the dollar eased to 89.63 yen from 89.67 yen on Tuesday.

The shared European unit was boosted Wednesday by news that private sector business activity in manufacturing and services increased across the eurozone in December at the fastest rate for two years, according to a key survey.

The purchasing managers' index (PMI) for the 16 countries using the single currency, compiled by data and research group Markit, rose to 54.2 points from 53.7 points in November, its highest reading since October 2007.

"The eurozone economic recovery continues to gather steam," said ING economist Martin van Vliet.

"The flash composite PMI for the 16-country region rose from 53.7 in November to 54.2 in December -- the ninth consecutive monthly increase and the highest reading in more than two years."

The upturn was led by strong manufacturing gains, but "accelerated" expansion in the services sector meant a "more evenly balanced" improvement in business conditions across the board, the survey underlined.

The euro also rebounded as players took profits after failing to push the currency below the 1.45 dollar level, said Yosuke Hosokawa, head of the foreign exchange group of Chuo Mitsui Trust Bank.

"But the rebound doesn't seem strong enough to set an upward trend for the euro," Hosokawa said.

The dollar had begun Asian trading on a stronger note after US data showed a spike in producer prices and higher-than-expected industrial output.

The figures sparked speculation that the Fed may raise interest rates earlier than previously expected.

"Investors were concerned that if data continues to beat expectations on the growth and price fronts, the Fed will change its tack," said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong.

"They are increasingly expecting a rate hike as early as in June. Still, we do not see the Fed hiking until 2011."

In London on Wednesday, the euro was changing hands at 1.4560 dollars against 1.4534 dollars late on Tuesday, 130.52 yen (130.33), 0.8917 pounds (0.8933) and 1.5129 Swiss francs (1.5121).

The dollar stood at 89.63 yen (89.67) and 1.0390 Swiss francs (1.0404).

The pound was at 1.6328 dollars (1.6265).

On the London Bullion Market, the price of gold climbed to 1,134 dollars an ounce from 1,122 dollars late on Tuesday.