LONDON: Gains in European stocks helped sterling and the dollar climb against safe-haven currencies like the yen on Thursday, with traders looking to Federal Reserve speakers later in the day for fresh direction on the U.S. rates outlook.
With doubts still growing over whether the Fed can raise rates in March, or indeed at all this year, the dollar was struggling to make much headway with the euro up 0.2 percent at $1.1035.
The Federal Reserve's Dennis Lockhart and John Williams are due to speak, with investors also focused on the G20 meeting of finance ministers and central bankers which starts on Friday. Pressure is on the leaders to get the global economy back on track and calm markets after one of the rockiest starts to a year on record.
A 6 percent fall in Shanghai's stock market did not spill over to Europe, where shares rebounded. That saw demand for the traditional security of the yen and Swiss franc wane.
"We haven't seen contagion from the weakness in China and that is supporting risk sentiment. The yen has weakened since yesterday evening," said Thu Lan Nguyen, a strategist with Commerzbank in Frankfurt.
"But I wouldn't sound the all-clear just yet. We see a persistent weakness in Chinese equity markets, and oil markets are still a risk."
Oil was down, but both Brent and U.S. crude were holding well above $30 a barrel and have looked somewhat steadier over the past week.
Sterling licked its wounds near a seven-year low against the dollar after three tumultuous days since Prime Minister David Cameron called a referendum on Britain's EU membership for June 23.
The pound was up 0.3 percent at $1.3975 but remains around 3 percent lower this week against the dollar, with a test of its 2009 low of $1.35 within sight.
"A slowdown in the pace of sterling's decline against the dollar doesn't yet signal a correction," Societe Generale strategist Kit Juckes said, recommending the yen, the dollar and the Norwegian crown against the pound.
The euro has also underperformed this week, on fears a British EU exit could mean more uncertainty for Europe. There was some attention on Thursday on a fall in inflation expectations, which bodes ill for the ECB's battle to refloat the economy.
The euro zone central bank's favoured measure of longer-term market inflation expectations fell to a record low below 1.4 percent on Thursday. It has fallen about 30 basis points this year due largely to lower oil prices.
People have started to price in the risk that the ECB will do more than previously assumed, but so far impact on the euro has been rather muted.
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