Hesistant share investors kept a wary eye on interest rates in China while the euro left the dollar in its wake on Wednesday after soft U.S. economic data argued against any rapid withdrawal of Federal Reserve stimulus.
The action was light, with European shares <.FTEU3> barely budging in early trading after a month when the region's stocks have dropped seven percent and then climbed back up again.
In the currency market, the euro was holding on to broad-based gains at $1.3755, having stretched as far as $1.3769 overnight, its highest in seven weeks and breaching a key resistance barrier at $1.3740.
It was also firm at 140.52 yen, while the dollar eased back to 102.14 yen and sterling regained some of the ground it had conceded on Tuesday awaiting the publication of minutes from the Bank of England's last meeting.
"The euro strength over the last few days has been more of a process of elimination rather than fundamental euro area strength," said Alvin Tan, an FX strategist at Societe Generale in London.
"The U.S. data has been weak over the last couple of weeks and the UK inflation number yesterday helped kick euro-sterling higher."
Dealers have been surprised by the euro's resilience given speculation the European Central Bank would have to ease policy further to avert the risk of deflation.
But with the euro zone economy sustaining signs of a slow pick-up, wagers on a move next month have been cut.
"One could expect that if the real economy is getting up and if we see that in Germany wage increases are quite substantial, there might be a certain self-correcting trend (in inflation)," ECB member Ewald Nowotny told Reuters in an interview.
"So we will see whether this needs some specific action or whether ... there would be a merit for waiting.
In Asia, Japan's Nikkei <.N225> pared its early losses to end off 0.5 percent, battling to maintain the momentum of Tuesday's 3 percent rally which followed a decision by the Bank of Japan to expand a scheme to encourage more bank lending.
Seoul lost 0.4 percent <.KS11>, but Sydney edged higher on solid earnings results <.AXJO>, while emerging markets focused on unrest in both Ukraine and Thailand. [EMRG/FRX]
Dealers had also kept a careful eye on China's central bank after it drained funds from the money market on Tuesday, though it took no new action on Wednesday which helped the Shanghai market bounce by 1.1 percent
The People's Bank of China (PBOC) is trying to engineer a gradual upward shift in the cost of money to encourage companies to deleverage and discourage high-risk shadow banking activity.
Investors are anxious in case the tightening goes too far and hurts economic growth, concerns that have periodically put pressure on currencies and shares across the Asian region.
Source: reuters
The action was light, with European shares <.FTEU3> barely budging in early trading after a month when the region's stocks have dropped seven percent and then climbed back up again.
In the currency market, the euro was holding on to broad-based gains at $1.3755
It was also firm at 140.52 yen
"The euro strength over the last few days has been more of a process of elimination rather than fundamental euro area strength," said Alvin Tan, an FX strategist at Societe Generale in London.
"The U.S. data has been weak over the last couple of weeks and the UK inflation number yesterday helped kick euro-sterling higher."
Dealers have been surprised by the euro's resilience given speculation the European Central Bank would have to ease policy further to avert the risk of deflation.
But with the euro zone economy sustaining signs of a slow pick-up, wagers on a move next month have been cut.
"One could expect that if the real economy is getting up and if we see that in Germany wage increases are quite substantial, there might be a certain self-correcting trend (in inflation)," ECB member Ewald Nowotny told Reuters in an interview.
"So we will see whether this needs some specific action or whether ... there would be a merit for waiting.
Seoul lost 0.4 percent <.KS11>, but Sydney edged higher on solid earnings results <.AXJO>, while emerging markets focused on unrest in both Ukraine and Thailand. [EMRG/FRX]
Dealers had also kept a careful eye on China's central bank after it drained funds from the money market on Tuesday, though it took no new action on Wednesday which helped the Shanghai market bounce by 1.1 percent
The People's Bank of China (PBOC) is trying to engineer a gradual upward shift in the cost of money to encourage companies to deleverage and discourage high-risk shadow banking activity.
Investors are anxious in case the tightening goes too far and hurts economic growth, concerns that have periodically put pressure on currencies and shares across the Asian region.
