New Delhi, March 6 -- The euro touched a four-month peak against the U.S. dollar on Thursday after the European Central Bank cut interest rates for the sixth time in nine months, as expected, but revised higher its near-term inflation forecast.

The single European currency rose 0.5% to $1.0848, after earlier hitting a four-month high of $1.0854. The euro has gained 4.5% so far this week, set for its biggest weekly jump since May 2009.

Germany is ramping up spending, with a massive 500 billion euro ($540.90 billion) special fund sought for infrastructure and plans to increase defense investment long-shackled by rigid borrowing rules. Hefty government spending, which can be supportive for growth overall, can also exacerbate price pressure...