London - The euro rebounded slightly on Tuesday from a two-month dollar low point reached on concern over debt in eurozone countries Greece, Spain and Italy, dealers said.
The European single currency advanced to $1.4106 in London trading from $1.4047 late in New York on Monday, when it had struck $1.3970 - which was the lowest since March 17.
Against the Japanese currency, the dollar eased to 81.85 yen from 81.96 yen on Monday.
The shared eurozone unit gained some respite after Germany's closely-tracked Ifo index showed that business sentiment steadied in May after two months of falls, as growth broadened with stronger domestic demand.
"The ability of the euro to bounce ... is reassuring but the euro is unlikely to avoid (a) further bout of jitters near-term," said analyst Jane Foley at Rabobank.
The Ifo index was unchanged at its new level of 114.2 points as companies assessed their current situation positively and the research group adopted a new methodology that now uses 2005 instead of 2000 as the base year.
However, analysts polled by Dow Jones Newswires had forecast a decline to 113.7 under Ifo's new accounting method, after peaking at 115.4 in February.
"Better Ifo data has provided some solace this morning but disappointing eurozone data yesterday in addition to the tension within EMU is countering expectations that the European Central Bank may be prepared to hike interest rate again during the summer," added Foley.
"That said it became clear in Monday's session that contagion risk has stepped up another notch."
The euro had slumped on Monday, hitting a two-month dollar low point amid a fresh bout of nerves over the outlook for Greece and as data pointed to slowing economic growth across the eurozone.
Fitch Ratings on Friday had slashed Greece's credit rating by three notches to B+, citing its growing problems in getting its public finances in order.
The news came amid lingering speculation that Athens might have to restructure or reschedule its mounting debt.
In another blow, Standard & Poor's lowered its outlook for Italy from "stable" to "negative".
Concerns are now mounting that Spain could follow Greece, Ireland and Portugal in seeking a bailout from the European Union and the International Monetary Fund.
"The trigger to the recent decline in the single currency were fears about the financial positions of Spain and Italy - the former due to the recent elections that had the potential to upset fiscal consolidation plans and the latter after a downgrade of its sovereign debt outlook by a credit rating agency late on Friday," added Kathleen Brooks at trading site Forex.com.
"We would argue that there still is differentiation between the stronger and weaker peripheral nations and the market is not pricing in the chance of any bailout for Spain or Italy in the medium-term.
"However, the markets' gaze has settled on these larger states and any financial or fiscal misdemeanours will be punished in the debt and foreign exchange markets alike."
In London on Tuesday, the euro changed hands at $1.4106 against $1.4047 late in New York on Monday, at 115.23 yen (115.17), 0.8734 (0.8712) and 1.2426 Swiss francs (1.2414).
The dollar stood at 81.85 yen (81.96) and 0.8826 Swiss francs (0.8836).
The pound was at $1.6119 (1.6123).
On the London Bullion Market, gold prices grew to $1 520.20 an ounce from $1 511.85 late on Monday.