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FOREX-Euro rises to more than 14 month peak; ECB ahead
April 6, 2011 / 1:05 PM / 7 years ago

FOREX-Euro rises to more than 14 month peak; ECB ahead

* Euro climbs to 14-mth high vs dollar; ECB ahead

* Yen hits 11-mth lows vs euro, 6-mth lows vs dollar

* Carry trade revival hurts yen, BOJ policy loose

(Recasts, updates prices, adds details, adds quote, changes dateline, previous LONDON)

NEW YORK, April 6 (Reuters) - The euro rose to its highest in more than a year against the dollar ahead of an expected ECB rate hike, while the yen slid on Wednesday to an 11-month low against the euro and a six-month low against the dollar.

More losses were expected for the yen as investors, such as macro hedge funds, add to bearish bets, with the Bank of Japan looking set to lag other central banks in tightening policy.

In contrast, the European Central Bank is widely anticipated to raise its benchmark rate by 25 basis points on Thursday and follow that with other rate hikes later in the year. ECBWATCH

The euro rose as high as $1.4317 EUR=, according to Reuters data, its highest since late January 2010, with traders reporting steady buying by Asian central banks. Large option barriers cited at $1.4350 and $1.4400 could cap gains in the near term, however. It last traded up 0.5 percent at $1.4293.

“The euro (move) is all on interest rate expectations,” said John Doyle, strategist at Tempus Consulting in Washington. “It looks more like a series of interest rate hikes.”

The struggling Japanese currency was in danger of breaching key long-term support levels against most currencies, having already fallen to a 2-1/2 year low against the Australian dollar.

The yen has slid since the first G7 intervention in a decade last month, stirring talk of a carry trade revival -- a strategy of selling low-yielding currencies to fund investment in currencies with higher interest rates.

“The yen is taking a lead as the global carry trade makes a return with the Bank of Japan likely to ease policy while the other central banks seek to tighten it,” said Lena Komileva, head of G-10 currency strategy at Brown Brothers Harriman.


carry trade graphic:


The euro was up 0.9 percent at 121.88 yen, having earlier touching an 11-month peak EURJPY=R, with stop-loss buying earlier in the session adding to its rise.

The dollar was up 0.4 percent at 85.20 yen JPY=, easing from highs on profit taking by Japanese retail investors.

It scaled a six-month peak having surged 12 percent from its post-World War Two record low of 76.25 yen hit in March, days after Japan’s northeast was devastated by a massive earthquake and tsunami.

The high-yielding Australian dollar AUDJPY=R surged to 88.68 yen, its highest since September 2008, with 90 yen seen as the next possible target.

The dollar fell 0.8 percent against the Swiss franc to 0.9176 francs CHF=.

An earlier report showed Swiss consumer price inflation rose by more than expected in March. Although Swiss inflation remains low by international standards as the strong franc has largely shielded the country from rising oil and food prices, the data could raise pressure on the Swiss National Bank to tighten rates. (Reporting by Nick Olivari; Editing by Kenneth Barry)

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