(Updates with late New York prices)
* Euro benefiting from Ukraine frictions
* Sterling at 4-1/2-year high vs dollar
* Fed and BoJ policy meetings also in focus
By Daniel Bases
NEW YORK, April 28 The euro hit a two-week high
against the U.S. dollar on Monday, helped by safe-haven flows
due to the Ukraine crisis and expectations that euro zone
inflation will show an increase this week, lessening the need
for looser monetary policy.
Sterling edged to a 4-1/2-year high of $1.6856 after
flirting with that milestone for the past month. It traded just
a tad higher on the day at $1.6809. Improving economic
activity and the potential buyout of British drugmaker
AstraZeneca by U.S. drugmaker Pfizer helped the
The United States imposed sanctions on seven Russian
government officials and 17 companies linked to Russian
President Vladimir Putin on Monday in a fresh attempt to force
Moscow to back down from its intervention in Ukraine.
"Since the onset of the Ukraine crisis the euro has
benefited. We expect that pattern to continue," said Michael
Woolfolk, global markets strategist at BNY Mellon in New York.
Woolfolk said even if sanctions impact Russia's main trading
partners, the euro will still find demand.
"The attraction of the euro is not because of growth
differentials but rather due to safe-haven capital flight. Euros
are more easily attained than dollars and there is a concern
that dollar-denominated assets could be more easily subjected to
sanctions," he said.
The euro reached a session high $1.3879 before slipping to
$1.3848, up 0.14 percent. Euro support also came from an
overnight spike in euro zone rates as surplus cash in
the banking system decreased, with banks repaying cheaper loans
taken earlier from the central bank.
That repayment shrank the European Central Bank's balance
sheet at a time when both the U.S. Federal Reserve and the Bank
of Japan were expanding their balance sheets through asset
purchases. Firm money market rates burnish the euro's appeal to
Currency markets were little changed by the first increase
in nine months for U.S. pending home sales.
April euro zone inflation data is expected to rise 0.8
percent year-on-year from 0.5 percent previously. The data is
Against the yen, the dollar rose 0.37 percent, to 102.53 yen
Monetary policy reviews by the Fed and the Bank of Japan
this week will likely limit aggressive positioning. Much of
Europe and Asia will be shut on Thursday for Labor Day. Japanese
markets are closed on Tuesday.
The euro gained 0.46 percent to 141.95 yen.
"Euro zone inflation should confirm that we have seen the
lows. If inflation comes in line with expectations, we could see
euro trading at $1.39 when the ECB meets next week," said Ian
Gunner portfolio manager with Altana Hard Currency Fund.
ECB policymaker Christian Noyer said on Monday the euro's
strength was a powerful deflationary factor and low inflation is
likely to persist.
(Editing by Louise Ireland, Meredith Mazzilli and Leslie Adler)