Euro rises versus dollar in London

The euro rose against the dollar on Monday as above-forecast eurozone inflation kept alive the view that interest rates in the region may rise sooner than previously thought. The data helped the euro recover from losses resulting from safe-haven buying of dollars, as well as Swiss francs and yen, due to unrest in Egypt. Analysts said gains for these currencies may be limited unless the trouble spreads to other countries.
Traders cited Middle East accounts buying euros against the dollar, lending further support after data showed eurozone inflation rose to an annual rate of 2.4 percent in January from 2.2 percent in December, exceeding forecasts for a 2.3 percent rise. The euro was up 0.4 percent against the dollar at $1.3670, around a cent above a low of $1.3570 hit on trading platform EBS in Asian trading.
Euro zone inflation is well above the ECB's target to keep the rate below but close to 2 percent and will keep intact support for the euro based on the view that the European Central Bank will raise interest rates much sooner than the US Federal Reserve. The euro also rose against other currencies, which had gained as investors sought safety due to the Egypt unrest. Against the Swiss franc it was up 0.5 percent at 1.2894 francs, while it gained 0.5 percent to 112.36 yen.
With street protests in Egypt showing no sign of abating, however, investors remained wary that political upheaval could hit other Arab countries, potentially disrupting oil production and heightening tensions in the region. "If the trouble really spreads and it pushes the oil price up even more, then that would probably spark more short-term flows into the dollar," said Karl Olsson, currency strategist at SEB in Stockholm.
Crude oil was steady at $89.20 per barrel after making a brief show above $90 in European morning trade. It remained supported on Middle-East supply concerns and traded around four percent above Friday's low. The Egyptian crisis was seen having the potential to overshadow economic events this week which include a slew of data such as US non-farm payrolls and central bank decisions. The dollar index was down 0.3 percent at 77.912, off a high of 78.325. The US unit was up 0.1 percent at 82.16 yen and up 0.2 percent at 0.9430 Swiss francs.