NEW YORK (Bloomberg) — The euro rallied against the dollar for the first time in eight months as concern eased that the 16-nation region's sovereign-debt crisis will worsen and spread to the global economy.

The dollar dropped in July against all of its most-traded counterparts before next week's payrolls report as Federal Reserve Chairman Ben Bernanke testified last week that "the economic outlook remains unusually uncertain". The greenback slid yesterday below 86 yen for the first time this year as a report showed US economic growth slowed in the second quarter.

"European data has been surprisingly robust, while all signs are that the US is heading for slower growth in the second half," said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. "There have been some hints from Fed policy makers that further easing could be on the table should the economy deteriorate."

The euro climbed 6.7 percent to $1.3052 yesterday, from $1.2238 on June 30, in its first monthly advance since November, when it increased 1.9 percent. The shared currency rallied 10 percent from a four-year low of $1.1877 reached on June 7. The euro gained 4.3 percent to 112.84 yen, from 108.22. The dollar slid 2.2 percent to 86.47 yen, from 88.43, in its third monthly decline.

Sweden's krona was the best performer among major currencies in July, appreciating 8.1 percent to 7.2104 versus the dollar and climbing 1.3 percent to 9.4113 against the euro.

The Scandinavian nation's gross domestic product grew 1.2 percent in the second quarter after a revised 1.5 percent advance in the first three months of the year, Statistics Sweden said on its website yesterday. The Riksbank on July 1 doubled its main lending rate from a record low to 0.5 percent to stem house price gains.

The euro rallied after the Committee of European Banking Supervisors said on July 23 that only seven of 91 European Union banks failed stress tests.

European Central Bank President Jean-Claude Trichet told reporters in Basel, Switzerland, this week that the stress tests were "a very important transparency exercise that, I have to say, we in the ECB appreciate". The ECB and the Bank of England both have policy meetings scheduled on August 5.

An index of executive and consumer sentiment in the euro nations increased this month to 101.3, the highest level since March 2008, the European Commission said this week. The number of people out of work in Germany fell in July for a 13th consecutive month, dropping by a seasonally adjusted 20,000 to 3.21 million, the lowest level since November 2008, the Federal Labor Agency reported.

"What's helping the euro is continued strong data," said John Doyle, a strategist in Washington at the currency-trading firm Tempus Consulting Inc. "That German unemployment number as well as the economic confidence, it's enough to push it higher."

The US economy grew at a 2.4 percent annual rate in the second quarter after a revised 3.7 percent increase in the first three months of the year, the Commerce Department reported last week. The median forecast of 81 economists in a Bloomberg News survey was for a gain of 2.6 percent.

The unemployment rate will increase to 9.6 percent in July, from 9.5 percent in the previous month, according to the median forecast of 57 economists in a Bloomberg News survey before the Labor Department's August 6 report. Employers may eliminate 60,000 jobs from nonfarm payrolls in a second consecutive reduction.