By Tommy Wilkes
LONDON, April 23 (Reuters) - The euro rose on Friday, edging back towards a seven-week high having nursed losses after European Central Bank President Christine Lagarde squashed speculation that policymakers will start to consider a tapering of bond purchases.
Flash purchasing managers' index numbers for April came in better than expected in the euro zone and supported the view that the region's economic recovery is accelerating, although the already-stronger euro was little moved by that data. The United States numbers are due at 1345 GMT.
The euro gained 0.3% to $1.2054 EUR=EBS while the dollar index, measured against a basket of currencies, was down 0.3% =USD.
The dollar is stuck in a narrow trading range near multi-week lows on Friday, as markets look to the next moves by major central banks ahead of a U.S. Federal Reserve meeting next week.
"The ECB sounded much more prudent than the BoC (Bank of Canada), as ECB President Christine Lagarde stressed that risks are still tilted to the downside and that uncertainty remains in place," UniCredit analysts said.
That probably offered investors the opportunity to take profit on EUR-USD after a recent rally, they said.
While rising coronavirus vaccination rates and an improving economic outlook are reasons to be optimistic, investors are scaling back expectations for a withdrawal of monetary easing after Lagarde said talk of phasing out emergency bond purchases was premature, analysts said.
Fed Chairman Jerome Powell is expected to repeat her message next week, which would put downward pressure on Treasury yields and cap the dollar's gains against most currencies.
"Powell has to reiterate the continuation of easy monetary policy just like Lagarde," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"As a result, the dollar is likely to fall against the yen, but the larger trend for the dollar is still mixed. The dollar can still rise against commodity currencies if commodity prices start falling again."
The Australian AUD=D3 and New Zealand dollars NZD=D3 firmed on Friday, but traders said risks are pointed to the downside due to the recent weakening in commodity prices.
The pound rose 0.4% to $1.3890 GBP=D3.
Cryptocurrency ether ETH=BTSP tumbled more than 10% and bigger rival bitcoin BTC=BTSP slid 7% amid speculation that a plan by U.S. President Joe Biden to raise capital gains taxes will curb investment in digital assets.
World FX rateshttps://tmsnrt.rs/2RBWI5E
(Additional reporting by Stanley White in Tokyo; editing by John Stonestreet)
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