Euro rises in London

The euro rose on Tuesday on buying by sovereign funds and after an influential German survey pointed to robust growth in Europe's largest economy, pushing eurozone debt concerns into the background. The ZEW's headline economic sentiment indicator surged to 15.4 points in January from 4.3 points in December, racing past forecasts for a reading of 6.8.
The data helped the euro extend earlier gains on demand from Middle East accounts and reports Russia was considering buying eurozone debt, although the upside was limited by continued uncertainty over plans to beef up the eurozone's rescue fund. The ZEW numbers came less than a week after comments on inflation from European Central Bank President Jean-Claude Trichet prompted talk that eurozone interest rates could rise sooner than previously thought. "The strong ZEW is only adding to positive euro sentiment," said Audrey Childe-Freeman, EMEA head of currency strategy at J.P. Morgan Private Bank.
The euro was up 0.8 percent against the dollar at $1.3401, having earlier hit $1.3430 on trading platform EBS to rise briefly above its 100-day moving average at $1.3423. The next target is the 21-week moving average at $1.3450. Russia's Finance Minister Alexei Kudrin said on Tuesday the country was supportive of the euro zone's efforts to see off a debt crisis and could buy new bonds from its European Financial Stability Facility (EFSF) rescue fund.
But he knocked down a newspaper report that Russia, holder of world's third largest reserves, was ready to resume buying Spanish debt, which it dropped as an investment after Spain was downgraded in November. The euro's gains helped push the dollar to its weakest in eight weeks against a basket of currencies at 78.686.
Doubts eurozone policymakers would reach a quick decision on enhancing a rescue fund to quell a sovereign debt crisis remained the euro's Achilles' heel. European finance ministers agreed on Tuesday to take their time over stengthening the eurozone's rescue fund and delay publishing new stress tests on the region's shaky banks until the second half of the year.
"There are still faultiness, especially pertaining to issues about the expansion of the rescue fund," said Simon Derrick, head of currency research at Bank of New York Mellon. "But countries like Russia and China need the euro as a credible alternative currency."
J.P Morgan Private Bank's Childe-Freeman said there was some optimism that EU leaders were responding faster than in previous crises, but she said the euro would face strong resistance at $1.35 until there was more information on the rescue plan.
Sterling also hit an eight-week high of $1.6060 after much higher-than-forecast UK inflation data while the Canadian hit a two-and-a-half year high of C$0.9837 per US dollar. The Canadian currency was boosted ahead of a Bank of Canada policy decision at 1400 GMT. Rates are expected to be left at 1.0 percent, but it is expected to raise its forecast for 2011 growth. The euro was up 0.45 percent against the yen at 110.44 yen.