Nov. 9 (Bloomberg) -- The euro may extend gains after the International Monetary Fund signaled the dollar is overvalued and as data indicates Europe’s economy is recovering, Westpac Banking Corp. said.

IMF comments were “a green light to further dollar weakness,” Lauren Rosborough, a Westpac currency strategist in London, wrote in a research note today. The euro may also rise as “data outturns in Europe continue to improve.”

While the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side,’’ the IMF said in a report published on Nov. 7.

The currency may rise further should it reach an initial target of $1.5064, Rosborough wrote.

It was at $1.4996 as of 3:30 p.m. in London after earlier rising to more than $1.50 for the first time in two weeks.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

Last Updated: November 9, 2009 10:40 EST