Euro at 2 1/2 year high as China, Ukraine jitters boost safe havens

Thu Mar 13, 2014 7:11am EDT
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By Alistair Smout

LONDON (Reuters) - The euro hit a new 2-1/2 year high against the dollar on Thursday as concerns over Chinese growth and political tensions in Ukraine took the fizz out of an attempted rebound in riskier assets.

The euro reached $1.3967 and looked set to test psychological resistance at a $1.40, in a possible sign that the currency is regaining safe-haven status following the currency bloc's prolonged sovereign debt crisis.

The euro zone's economic recovery seems to be picking up steam even as the European Central Bank resists pressure to ease policy further to counter deflation risks.

"The policy messages and data support the euro and we think that will allow it to continue to push higher from here," said Ian Stannard, a strategist at Morgan Stanley in London.

More traditional safe-havens also strengthened, with the Swiss franc extending gains against the dollar to 0.87095 francs - its strongest since late 2011. The Japanese yen also firmed.

Stock markets in Europe edged higher but remained pinned near one-month lows, with a 0.1 percent rise in the pan-European FTSEurofirst 300 .FTEU3 barely recouping any of the 1.1 percent drop in the previous session.

The move echoed trading in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS managed to rise 0.5 percent, clawing back half the previous day's losses, despite concerns over Chinese growth that limited gains.

Soft Chinese data dented many markets. Japan's Nikkei .N225 slipped 0.1 percent, erasing gains made after Japanese machinery orders beat expectations, while South Korean shares .KS11 also lost most of their earlier gains.   Continued...

Pedestrians walk past an electronic board showing various stock prices, which are reflected in a polished stone surface, outside a brokerage in Tokyo January 24, 2014. REUTERS/Yuya Shino