AFP - The euro rose against the dollar on Tuesday after European Central Bank president Jean-Claude Trichet dropped another hint about a possible hike to eurozone interest rates next month.
In London late morning trade, the European single currency rose to $1.4122 from $1.4092 in New York late on Monday. The dollar eased to 81.68 yen from 81.71 yen.
Trichet, giving a speech in Paris late on Monday, reiterated his stance on fighting inflation. The comments were regarded as another signal that an interest rate hike could be around the corner, dealers said.
"Trichet ... said that inflation in the eurozone was above the central bank's comfortable target level," noted VTB Capital analyst Andrey Kruchenkov.
"Expectations of an impending rate hike by the ECB could keep the dollar under pressure in the short term," he added.
The European Central Bank is widely predicted to raise its benchmark interest rate from the current record low of 1.0 percent, a level it first reached in May 2009, as it seeks to combat inflationary pressures.
At the same time, traders are on tenterhooks ahead of publication of the results of so-called stress tests on Ireland's four biggest banks.
"Concerns about the European banking system are also weighing with the results of the latest batch of stress tests expected to have an effect with Irish banks expected to find out how much extra cash they will need," said CMC Markets analyst Michael Hewson.
The Central Bank of Ireland will publish the results on Thursday amid ongoing tensions over the eurozone debt crisis and stubborn concerns over a potential bailout of debt-laden Portugal.
Sterling meanwhile held steady against rival currencies as dealers digested a modest revision to British gross domestic product data for the fourth quarter of last year.
The economy shrank by 0.5 percent between October and December compared with the third quarter, official data showed. That compared with the prior estimate of a deeper 0.6-percent contraction.
Market expectations had been for no change, according to analysts polled by Dow Jones Newswires.
In London trading on Tuesday, the euro changed hands at $1.4122 against $1.4092 in New York late Monday, at 115.37 yen (115.16), £0.8820 (0.8809) and 1.2958 Swiss francs (1.2911).
The dollar stood at 81.68 yen (81.71) and 0.9176 Swiss francs (0.9161).
The pound was at $1.6011 (1.5996).
On the London Bullion Market, the price of gold slid to $1,415.28 an ounce from $1,417 late Monday.
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