Euro steadies in London

The euro stayed steady versus the dollar on Thursday with markets on alert for signs the European Central Bank would raise interest rates again in June. The euro showed little reaction after ECB's left interest rates on hold as expected, but the single currency stayed in positive territory against the dollar as markets awaited ECB President Jean-Claude Trichet's news conference at 1230 GMT.
The yen shot higher as investors slashed exposure to riskier assets, sparking concern about possible further intervention if the Japanese currency continues to rise sharply. The dollar fell below 80 yen for the first time since Group of Seven intervention to curb yen appreciation as commodity and equity markets.
"Declines in commodity markets and risk appetite has been the catalyst for some significant moves, especially in Aussie/yen. People are taking the view that the global story is not as strong, with data in the western world weakening and tightening measures in Asia," CIBC's Stretch said. Data on Thursday showed German industrial orders unexpectedly slid 4.0 percent during March.
Investors were also concerned that measures by Asian central banks to tighten monetary policy in response to rising inflation could weigh on global growth, with the Philippines and Malaysia both raising rates by 25 basis points on Thursday. The euro was steady on the day against the dollar at $1.4827, off a 17-month high of $1.4940 hit on Wednesday. Traders said a large option structure with a barrier at $1.4950 was expected to restrict any gains. Against the yen, however, the euro fell more than 1 percent to its lowest in more than 2 weeks around 117.98 yen as a steep slide in commodities such as silver and gold prompted investors to slash long positions in riskier currencies.
Since many investors have used the low-yielding yen to fund higher-yielding investments the yen shot higher across the board, with the dollar dropping as low as 79.57 yen, its weakest since the aftermath of Group of Seven intervention. The G7 intervened to sell the yen after March's earthquake. Falls accelerated on the move below 80 yen, with more stop loss orders triggered on the break below 79.75, traders said.
"Already there has been increasing noise around a possible intervention and it will be interesting to see if this move leads to further liquidation of the margin traders' long positions (in dollar/yen)," a London-based trader said. For the latest Reuters poll on the yen. The Australian dollar slid around 0.9 percent to a two-week low of $1.0652 and tumbled more than 1.5 percent to 84.82 yen, a five-week low. Earlier weak Australian retail sales data helped weigh on the higher-yielding currency.