Euro falls back ahead of ECB meeting

March 03, 2011 | 09:36

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The euro eased in Asian trade on Thursday, after rising on increasing inflationary pressure in Europe as attention shifted to a European Central Bank meeting later in the day.

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The euro slid to $1.3855 in Tokyo morning trading from 1.3867 in New York late Wednesday. The single European currency traded at 113.41 yen, slightly lower from 113.45 yen.

The dollar was flat at 81.84 yen against 81.85 yen.

The euro attracted active purchases overnight ahead of an ECB board meeting Thursday, as more economic data on the continent suggested firming prices, a harbinger of interest rate increases.

The ECB is unlikely to raise interest rates at the upcoming meeting but will try to smooth the way for a near-term hike, dealers said.

"Euro purchases accelerated overnight on speculation that (ECB head Jean-Claude) Trichet's remarks would raise alert levels against inflation," said Yuichiro Harada, dealer at Mizuho Corporate Bank.

The Swiss franc remained firm versus the greenback after hitting a record on Wednesday, as investors bought the safe haven currency amid the turmoil in the Arab world.

The dollar traded at 0.9238 Swiss francs, versus 0.9234 in New York.

Crude oil prices spiked higher Wednesday as violent clashes in Libya between leader Moamer Kadhafi's forces and the opposition stoked concerns about the country's oil production.

Benchmark WTI light, sweet crude oil for April delivery was at $102.23 on the New York Mercantile Exchange, a steep $2.60 rise from Tuesday's close.

The situation in Libya grew increasingly tense, with the embattled Kadhafi warning that thousands would die if the West intervenes to support the uprising against him.

Gold also jumped more than $5 an ounce to reach an all-time record of $1,440.32 in London.

AFP

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