NEW YORK (MarketWatch) — The dollar gained against the euro on Thursday, pushing the shared currency to a 22-month low, in a volatile session influenced by economic data, renewed attention on the Swiss franc and a prediction of more central-bank support.

The euro EURUSD, -0.23% traded as low as $1.2514 during European trading hours, then spiked to $1.2620 before turning back down to $1.2539 -- its lowest since July 2010. It traded at $1.2578 in North American trade late Wednesday.

The dollar index DXY, +0.14% , which measures the U.S. unit against a basket of six major currencies, recovered to trade up to 82.342 — its highest level since 2010 and up from 82.073 late Wednesday.

The dollar briefly declined after a new economic indicator from Markit said U.S. manufacturing conditions in May grew at the slowest pace in three months. See more on U.S. PMI.

The euro jumped against the Swiss franc in U.S. morning trading to its highest since March, a big move given the euro’s been locked very close to 1.20 francs since the Swiss National Bank vowed to keep its currency from strengthening.

The euro EURCHF, +0.03% rose as high as 1.2076 Swiss francs, as some analysts pointed to rumors that Switzerland will begin taxing deposits. It quickly pared gains to stand little changed at 1.2014 francs.

At the same time as the flash U.S. PMI data came out, “(unconfirmed) market chatter of a tax on CHF deposits lifted EUR/CHF and EUR/USD with it, so this factor and the lack of available back data on U.S. PMI pretty much ruled out any consistent behavior to this release,” Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank, wrote in emailed comments. “In the past the biggest argument against a tax was that it would drive Swiss banking activity ‘off shore’.”

Also, analysts pointed to a report from J.P. Morgan that the recession in Europe will lead the European Central Bank to ease monetary policy further with interest-rate cuts and another long-term refinancing operation. See more on J.P. Morgan’s ECB outlook.

The problem the ECB and President Mario Draghi face is they must realize “any further moves to loosen monetary policy essentially signal that the euro zone is in worse condition than they’ve led us to believe,” said Christopher Vecchio, a currency analyst at DailyFX. “If it begins to lower rates and inject more liquidity, it’s going to be seen as another central bank trying to dilute its currency.”

European PMI sinks

Earlier, economic surveys pointed to a deepening downturn across the euro zone, weighing on the euro.

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A preliminary euro-zone purchasing managers’ index for May indicated private-sector activity across the region shrank at its fastest pace since mid-2009. Meanwhile, the closely-watched Ifo German business climate index dropped more than expected to a six-month low. See more on euro-zone PMI

The data reinforce perceptions that the euro zone’s first-quarter rebound in gross domestic product amounted merely to a “blip,” wrote economists at Société Générale. German Ifo data

Potentially limiting the euro’s decline, strategists said a bounceback may be overdue after weeks of heavy selling.The euro remains down 5% versus the dollar since the beginning of May.

Traders remain heavily positioned against the euro already, raising the chance that if certain technical levels are hit, those trades would be unwound.

Against other major currencies, the dollar also recouped some intraday losses. The British pound GBPUSD, -0.03% fell to $1.5664, compared with $1.5698 on Thursday.

The Office for National Statistics revised down its estimate of first-quarter gross domestic product to show a 0.3% contraction versus the final three months of 2011. The agency had initially estimated a 0.2% GDP fall. British GDP revised down