Euro rises, boosted by higher European shares

The euro rose on Thursday as early gains in European shares, following a climb on Wall Street, indicated improving demand for riskier currencies.

The yen slipped, pulling further away from multi-year lows against the dollar and the euro, as investors speculated whether Bank of Japan Governor Masaaki Shirakawa will comment on the yen or monetary policy at a Federal Reserve retreat this week.

European shares rose 0.8 per cent, clawing back from a five-week low on forecast-beating results, although gains were capped after US data on Thursday raised concerns the world's biggest economy risks sliding back into recession.

A slide in new US home sales and weak durable goods orders highlighted weakness in the US economy, but analysts said such data has failed to stoke safe-haven demand for the dollar, as it did earlier in the month.

"Stocks are back despite weak US data," said Carl Hammer, chief currency strategist at SEB in Stockholm.

"The conundrum is what happens to the correlation between risk appetite and the dollar. I'm not certain we will continue to see a stronger dollar when the stock market falls."

The euro rose 0.6 per cent on the day to a session high of $1.2746. By 0756 GMT, it traded around $1.2710. This helped push the dollar down 0.4 per cent against a currency basket.

A 0.8 percent rise in European stocks helped the single currency pull further away from a six-week low of $1.2584, according to Reuters data, hit earlier this week.

The euro briefly poked above its 55-day and 100-day moving averages at $1.2713 and $1.2737 respectively. A close above these levels on Thursday would add to upward momentum in the single currency.

Against the yen, the euro rose 0.8 per cent to the day's high of ¥108.02, adding to its recovery from a nine-year low of 105.44 yen hit on Tuesday.

The Japanese currency also slipped against the dollar, which rose slightly on the day to ¥84.73.

Earlier this week it hit a 15-year low of 83.58 yen as investors tested Japanese authorities to see whether they would go beyond trying to talk down the yen.

On Thursday, traders said the dollar/yen and cross/yen were rising partly on short-covering due to caution about possible Japanese intervention, while many investors were sidelined.

Sellers of the greenback are believed to have set stops in the ¥85.05-85.10 region, and if such orders are triggered it could boost the dollar back to the 85.60-85.80 area.

Increasing concerns about a global economic slowdown in the past few months have pushed the yen and the Swiss franc higher due to their perceived safe-haven status.