* ECB refrain, capital inflows lift common currency
* Kiwi rallies on rate hike, jobs data boosts Aussie
* U.S. dollar lags major currencies after mixed data
By Richard Leong
NEW YORK, March 13 The euro rose to 2-1/2-year highs against the dollar on Thursday in the wake of the European Central Bank's avoidance of further stimulus, signalling some confidence the region has put recession and its debt crisis behind.
Among other major currencies, the New Zealand and Australian dollars surged. The kiwi rose to its strongest against the dollar in 10 months after the New Zealand central bank hiked interest rates and signalled more to come as its economy has gained traction. Surprisingly strong employment data lifted the Aussie by more than 1 percent against the greenback.
"The policy messages and data support the euro and we think that will allow it to continue to push higher from here," Ian Stannard, a strategist at Morgan Stanley in London, said.
The single currency, pitched by many banks at the start of 2014 as one of this year's likely losers, has drawn strength from a trade and capital account that is roughly 30 billion euros to the good monthly.
The euro has gained 1.5 percent since the ECB took no action last week to ease policy and gave no indication it was about to. Traders said if it pushes past the round figure of $1.40 it could move swiftly higher, though it has a long way to reach $1.50 last seen in late 2009 prior to the onset of the euro zone debt crisis.
The common currency last traded up 0.2 percent at $1.3935 and 0.2 percent against the yen at 143.10 yen.
The U.S. dollar lagged against the euro, yen and other major currencies after mixed data on domestic retail sales and jobless claims failed to bolster analysts' outlook on the U.S. economy ahead of next week's policy meeting of U.S. policy-makers.
The dollar index hit its lowest level since late October before trimming its decline since the release of the data. It was last 0.3 percent lower at 79.341.
"The dollar got a brief boost here, but the data were mixed," said Brian Dangerfield, currency strategist at RBS Securities in Stamford, Connecticut.
U.S. jobless claims fell to a three-month low last week, while retail sales rose a tad more than expected by 0.3 percent in February but the January readings were downgraded.
Support for the yen and Swiss franc were underpinned by jitters over the tension between Russia and the West over Ukraine. The dollar was 0.4 percent weaker at 102.32 yen and 0.3 percent lower versus the Swiss franc at $0.8716.
KIWI, AUSSIE REBOUND
The New Zealand and Australian dollars staged a comeback overnight after they suffered earlier this week on a dramatic sell-off in copper and other commodities due to growing concerns over the Chinese economy, a major driver of demand for Australia's huge mining sector.
That move calmed overnight with Asian stock markets and copper prices stabilizing, helping a recovery in currencies closely linked to the prices of the raw materials of which China has been the major global buyer in recent years.
Still, the latest Chinese economic data was lukewarm at best. Industrial output rose 8.6 percent in the first two months of 2014 from a year earlier, missing market expectations, and growth in retail sales also fell short of forecasts.
"The numbers out of China were not impressive by all means, but it was not bad enough for players to create big fresh 'risk off' positions - thus currency reaction was limited," said a trader at a large Japanese bank in Tokyo.
Earlier the Reserve Bank of New Zealand (RBNZ) delivered a widely expected interest rate hike and flagged that a further 100 basis points of tightening was possible this year.
That pushed the New Zealand dollar up to $0.8606, its highest since May 2013. The kiwi also brushed a fresh six-year high of 88.31 against the yen.
"Today's communication strongly suggests the RBNZ will be on the front foot for the next few meetings," Michael Turner, strategist at RBC in Sydney, said.
In the meantime, the Australian government reported 47,300 jobs were created in February, more than double market forecasts.
The Aussie rose 1.2 percent against the U.S. dollar at $0.9099 after hitting a low of $0.8923 on Wednesday.