* Yuan chalks up biggest weekly loss on record
* Euro zone inflation data eyed for hints on ECB outlook
* Focus also on lingering tensions in Ukraine
* Swedish GDP surprise sends crown storing
By Patrick Graham
LONDON, Feb 28 A weakening Chinese yuan and
tensions in Ukraine drove investors into the relative safety of
the Japanese yen on Friday while shockingly strong Swedish
growth numbers propelled the crown higher.
The yen gained around a third of a percent against both the
dollar and euro , the latter still looking shaky
before inflation numbers which may set the tone for next week's
meeting of European Central Bank policymakers.
The moves put the yen, last year's major loser among the
world's most traded currencies, within sight of resistance at
101.50 and beyond that levels around 100.50 which are its
strongest since November.
"Clearly with what's happening in emerging markets, the yen
is fulfilling its traditional role as a safe haven," said Neil
Mellor, strategist with Bank of New York Mellon in London.
"The other side of that is that people are clearly using it
to wind up the speculative trade we saw last year."
The yuan recovered some ground in early European
trade but still lost 0.87 percent for the week, its biggest
weekly loss on record.
It weakened briefly to as low 6.1808 per dollar, 0.8 percent
below Thursday's close, before recovering to 6.1431
and is now down 1.4 percent in the past 10 days.
That may sound like a modest turnaround, but represents a
sea change in one of the past decade's most reliable trades - a
steadily stronger yuan against the dollar - and comes at a time
of investor nervousness over Chinese growth.
"The move over the past week has caught a lot of people by
surprise and that has injected a lot of volatility into the
market," said Mellor.
"I think Chinese authorities are not just aiming to widen
the band on the yuan with this move, I think they are also as
concerned about growth and the aim here is to put a stop to the
steady appreciation we have seen in recent years."
The other big mover in early European trade was the Swedish
crown, which rose sharply against the euro and the dollar after
the economy expanded three times faster than expected in the
The euro was 0.9 percent lower against the crown at 8.8578
crowns per euro after the data, down from around
8.92 crowns beforehand.
ECB chief Mario Draghi has emphasised the bank's readiness
to take action to see off downside risks to inflation that is
already less than half the bank's target, but markets remain
uncertain about whether that may lead to more action from the
bank to spur growth next week.
German inflation was a touch softer but still broadly in
line with expectations on Thursday and it might need a sharply
lower figure for the euro zone as a whole on Friday to shift
"Evidence that Eurozone inflation stabilised close to recent
lows could discourage bets on further aggressive easing by the
ECB and support the euro going into the March meeting,"
Citigroup analysts said in a morning note.
Most strategists say the market is split down the middle
over whether the ECB acts next Thursday.
"It is completely understandable that people are looking at
euro zone inflation as a possible trigger for a move," said
"I'm just not so convinced that even if we get a figure of
0.6 or 0.7 percent today that will be enough. We know that these
decisions on the ECB council have become very political and we
know that the German contingent are opposed to lower rates."