Euro advances in New York

The euro rose to an 11-month high against the yen and neared a recent five-month peak against the dollar on Tuesday on expectations of rising eurozone interest rates that could keep the zone's common currency supported in months ahead. Hedge fund adviser Medley Global Advisors said in a report that the European Central Bank was poised to raise rates on Thursday - as expected - and build in room to tighten policy further.
The report helped the euro recover from losses sparked by a ratings downgrade of Portugal. Expectations of rising UK rates also got a lift after strong British service sector data drove sterling higher. Rate differentials have moved against the dollar in recent weeks after comments by Federal Reserve officials signalled an uncertain outlook for US monetary policy.
The euro was up 0.9 percent at 120.63 yen after hitting an 11-month high of 120.69, according to Reuters data. Against the dollar, the euro was flat at $1.4221, just below a session high of $1.4245 and near a five-month high of $1.4268 touched on Monday. Expectations for a 25-basis-point rate hike by the ECB on Thursday have supported the euro in recent weeks, with reported bids from $1.4140 seen limiting losses. "With systemic risks fading, ECB tightening is likely to keep yield support for the euro elevated." The firm expects the euro to overshoot its three-month forecast of $1.44 and rise to $1.50 in 12 months.
The Australian dollar fell as low as $1.0289, retreating further from its post-float high touched on Monday. China hiked interest rates by 25 basis points, the fourth rate increase since October. Given strong trade links, the Aussie can be the most sensitive currency to tightening moves by China. The aussie last traded down 0.3 percent at $1.0330.
An unexpected leap in UK services sector activity to a 13-month high buoyed the pound as the market moved closer toward pricing in a UK rate hike in June. Against the dollar, sterling rose 0.9 percent to $1.6284. The euro fell 1 percent to 87.31 pence. The dollar rose 0.9 percent to 84.82 yen, having hit as high as 84.90 yen, a more than six-month high, according to Reuters data. A 200-day moving average at around 83.55 is now seen acting as support.