Euro rides high as yields spike, Asia stocks rise on Greece deal hopes
TOKYO (Reuters) – The euro continued riding high on Thursday thanks to a spike in euro zone debt yields, while Asian stocks rose on hopes that Greece could be inching closer to a deal that would save it from default.
The European common currency rode the momentum gathered overnight when the European Central Bank, in line with recent data suggesting deflationary pressures were not as pronounced as feared, raised its inflation forecast for 2015.
ECB President Mario Draghi followed up by saying the central bank saw no reason to adjust its monetary policy stance following the recent surge in European bond yields.
The prospect of the ECB not front-loading its bond purchases pushed euro zone yields up and propelled the euro higher.
The benchmark German 10-year Bund yield <DE10YT=RR> climbed to within a hair of 0.90 percent overnight, from around 0.50 percent at the start of the week.
The euro was steady at $1.1262 <EUR=>, having rallied about 2.5 percent so far this week.
"Unless there is a very big upside surprise in Friday’s U.S. labor market report, the EUR/USD should make its way toward $1.15. The road may be bumpy and the rally could stall at the May high of 1.1466 but the path of least resistance for the EUR/USD is higher," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.
U.S. Treasury yields rose in tandem with their European counterparts and while the dollar lost ground against the euro, higher yields helped it rebound modestly against the yen.
The dollar traded at 124.36 yen <JPY=> after pulling away from the previous day’s low of 123.79. The currency had climbed to a 13-year high above 125 yen on Tuesday when the dollar enjoyed a broad rally on upbeat U.S. economic indicators.
In equities, risk appetite warmed after Greece’s international creditors signaled on Wednesday they were ready to compromise to avert a default.
Japan’s Nikkei <.N225> and South Korea’s Kospi <.KS11> both gained 0.3 percent, while Australian shares added 0.2 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was little changed.
In commodities, crude oil struggled after sliding overnight on concern generated by a big build in distillates and with OPEC expected to reject output cuts at its meeting on Friday.
U.S. crude <CLc1> crawled up 0.1 percent to $59.71 a barrel after plunging 2.6 percent the previous day.