German business confidence rose for the third consecutive month in January as the recovery prospects for Europe's largest continue to improve.

The Ifo Institute's key Business Climate Index, built from a survey of more than 7,000 senior executives, rose to 104.2 from a reading of 102.4 in December, well ahead of economists' forecasts and the third straight increase from the two-and-a-half year low it hit in October. The Institute's expectations index also increased to 100.5 from a revised 98 in December, while the index of current conditions hit 108, slightly higher than analysts' forecasts of 107.2.

The Institute's head economist, Klaus Wohlrabe, says the figures suggest busineses are beginning to feel the affects of an easing Eurozone debt crisis and that first-quarter GDP should advance by around 0.2 percent

The single currency rose to an 11-month high of $1.3434 against the US dollar and to 85.25 pence against the pound, the highest in more than 13 months, following the release. It advanced around 1 percent to 122.10 against the yen.

A reading of German investor confidence, released earlier this month by the Mannheim-based Centre for European Economic Research, rose to a near 2-year high of 31.5 while private data measuring manufacturing and services activity in suggested Europe's largest economy would recover at a significantly faster pace than its single currency partners.

The International Monetary Fund's World Economic Outlook hived its forecast for German and Eurozone growth for this year by 0.3 percent Wednesday, suggesting that Germany's modest 0.6 percent advance won't be enough to pull the bloc out of recession. The German government expects a 0.4 percent advance this year.

A Eurozone recovery, however, is expected for next year with 1 percent growth pegged by the Fund.