The euro rose to session highs against the dollar on Wednesday after a key gauge of German business confidence surprised to the upside. Germany's May business climate index came in at 105.6, above the consensus forecast of 105, according to the German Ifo institute. "Everybody was looking for a decline," said Niels From, currency strategist at Dresdner Kleinwort Wasserstein in Frankfurt. "It confirms good momentum in German economy despite a strong euro. It's supporting the currency." Many in the market had been expecting a lower number after data on Tuesday showed a sharper than expected fall in Belgian business confidence for the same month. The dollar rose earlier, particularly against the yen, as a report of possible human-to-human transmission of bird flu in Indonesia aggravated a shakeout in dollar-funded emerging market positions. By 0830 GMT, the euro was up a quarter percent at $1.2851 after hitting a session high of $1.2867 in the wake of the strong German data. The dollar was flat at 111.89 yen after rising as high 112.64 yen on bird flu jitters. The strong Ifo reading reinforced expectations for more euro-supportive interest rate rises in the euro zone this year. For clues about the prospects for rates in the United States, traders were awaiting data on U.S. durable goods orders and new home sales in April, due at 1230 GMT and 1400 GMT. Economists expect a median drop in orders of 0.5 percent compared with a rise of 6.4 percent the previous month. New homes sales are also expected to fall. "U.S. data is expected to be on the downside, so euro/dollar should remain strong," said From.