* Sterling at 4 1/2-year high vs dollar
* U.S. jobs, euro zone inflation major event risks
* Fed and BoJ policy meetings also in focus
(Recasts, adds fresh comments, details)
By Anirban Nag
LONDON, April 28 The euro rose to a two-week
high against the dollar on Monday, supported by expectations
inflation in the euro zone will tick up and ease pressure on the
European Central Bank to loosen monetary policy.
Sterling rose to a 4 1/2-year high against the dollar
, boosted by robust UK data and expectations of merger
and acquisition inflows, after U.S. drugmaker Pfizer
confirmed it had made a bid approach to Britain's second-biggest
drugs group, AstraZeneca.
But most are unlikely to take aggressive positions before
major events in the United States and the euro zone. Policy
reviews by the U.S. Federal Reserve and Bank of Japan (BoJ) will
also keep the market cautious in a holiday-shortened week. Many
centres in Europe and Asia will be shut on Thursday for Labour
Day. Japan will be closed on Tuesday.
The euro rose 0.3 percent to $1.38765. Against the
yen it was up 0.2 percent at 141.75 yen. The
pan-European FTSEurofirst 300 index, which rose to near
its six-year high earlier this month, rose 0.5 percent in early
trade, improving sentiment for the euro.
Traders said expectations that euro zone consumer price
inflation could rise when data is released later this week were
helping the single currency. Euro zone inflation for April, due
on Wednesday, is forecast to rise to 0.8 percent, year-on-year,
from 0.5 percent, previously.
"We are seeing some inflows into the euro," said Ian Gunner,
a portfolio manager at Altana Hard Currency Fund. "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."
The dollar was steady against the yen at 102.215 yen,
well within its range over the past two weeks. U.S. yields,
which have a good correlation to the pair, nudged higher in
anticipation of encouraging economic data out of the U.S.,
including jobs numbers at the end of the week.
"There are three clear U.S. highlights - first-quarter GDP
and the Federal Reserve decision on Wednesday and April's labour
report on Friday," said Tom Levinson, a currency strategist at
ING. "GDP may well be soft, but we take comfort from far better
prospects for second quarter. The report should, though, be
offset by a firm ISM survey and 200,000 plus nonfarm payroll
All this would see the Fed trim its asset purchases by
another $10 billion to $45 billion, he said.
Despite prospects of a Fed tapering, the safe-haven yen was
supported as investors kept an eye on tensions in Ukraine.
Pro-Russian rebels paraded European monitors they are
holding in eastern Ukraine on Sunday. They had freed one but
said they had no plans to release another seven. Meanwhile, the
United States and Europe prepared new sanctions against Moscow.
The Fed is expected to cut back further on its bond-buying
stimulus, but the BOJ is expected to maintain its stimulus
programme at its April 30 meeting.
(Additional reporting by Masayuki Kitano in Singapore; Editing
by Larry King)