Euro boosted by improving PMI The euro surged to its highest point since early May against the US dollar on Friday as surprisingly positive economic data suggested the eurozone recession was easing amid ongoing fears of easy monetary policy in the US. The "flash" estimate of Markit's composite eurozone purchasing managers" index rose to 47.3, its highest level in nine months, but stayed well below the 50 mark denoting expansion. BNP Paribas" foreign exchange team said the single currency was also benefiting from a positioning perspective as year-end window dressing dragged in positive flows. The euro gained 0.7 per cent against the US dollar to a high of $1.3173 on Friday to finish the week up 1.8 per cent. The dollar index fell 0.5 per cent to 79.5 points as a US report on inflation showed prices fell in November for the first time in six months. Sterling retrenched following Standard & Poor's decision on Thursday to downgrade the outlook on Britain's triple A rating to negative, implying a one-third chance of a downgrade over the next two years. All three large credit rating agencies now have Britain's triple A status on negative outlook. A downgrade might hit sterling if it deters haven flows, which have supported the pound during the financial crisis. The pound gained 0.2 per cent against the dollar to $1.6141 to finish the week up 0.6 per cent. The Japanese yen steadied ahead of elections on Sunday, when the opposition Liberal Democratic party and its overtly dovish leader Shinzo Abe are expected to return to power. The yen had dropped as far as Y83.96 to near a nine-month low earlier in the session after the Bank of Japan's quarterly Tankan report, released on Friday, showed that the key measure of business confidence among big manufacturers fell sharply. Credit Suisse said the data probably reinforced expectations that the BoJ might increase its easing measures. Despite the yen fighting back to trade up 0.2 per cent against the dollar on Friday to Y83.49, analysts believe it will resume its fall throughout 2013. The yen has lost 8 per cent against the dollar since the middle of September, when it sat at Y77.11, and analysts are targeting levels of between Y85 and Y90 in 2013. Derek Halpenny of Bank of Tokyo-Mitsubishi argued that since markets have priced in a substantial majority being formed by an LDP-led government, any failure to reach this may encourage yen buying in the short term to square short positions, which sit at multiyear highs.