Euro up on risk-sensitive currencies rally

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Euro up on risk-sensitive currencies rally

SINGAPORE The euro went up on Wednesday as riskier currencies bounced, buoyed by optimism China's eventual emergence from COVID restrictions helps growth, while investor focus turned to U.S. data and the Federal Reserve.

The euro had lost 1 per cent overnight, its sharpest drop in more than two months, after a larger-than-expected drop in German inflation, but it moved up from three-week lows to $1.0566 in Asia trade.

The trade- and-China sensitive Australian dollar increased 0.7 per cent to $0.6735, recouping some overnight losses, while the yuan gained 0.2 per cent firmer to 6.9010 per dollar, creeping back toward Tuesday's four month peak.

State media in China played down the severity of a surge in COVID 19 infections on Tuesday, as the country moved out of lockdowns and restrictions to live with the virus.

Thailand's baht has climbed six-month highs on the expectation that the economy will grow due to improved tourism as China drops quarantine for travellers and the Singapore dollar hit an 18 month high on Tuesday.

In the still holiday-thinned Asia session, larger moves were capped by looming economic data in the United States and the release of minutes from last month's Federal Reserve meeting. National Australia Bank head of FX strategy, Ray Attrill, said in Sydney that we're back in to some A-league economic data, so maybe we'll get some more fundamentally-driven price action out of that.

The yen was 0.2 per cent stronger at 130.76 per dollar.

The U.S. dollar index went up 1 per cent on Tuesday to 104.73, mostly due to the euro's drop, and it eased a bit on Wednesday to 104.47. The pound was close to $1.1986 and the kiwi fell by 0.3 per cent to $0.6263.

In December, the German CPI fell to 8.6 per cent, from 10 per cent the previous month, against expectations of 9.1 per cent, according to data on Tuesday, knocking the euro and rallying bunds.