Buyers hesitant; 
euro holds gains

The action was light, with European shares barely budging in early trading after a month when the region’s stocks have dropped seven percent and then climbed back up again.

In the currency market, the euro was holding on to broad-based gains at $1.3755, having stretched as far as $1.3769 overnight, its highest in seven weeks and breaching a key resistance barrier at $1.3740.

It was also firm at ¥140.52, while the dollar eased back to ¥102.14 and sterling regained some of the ground it had conceded on Tuesday awaiting the publication of minutes from the Bank of England’s last meeting.

“The euro strength over the last few days has been more of a process of elimination rather than fundamental euro area strength,” said Alvin Tan, an FX strategist at Societe Generale in London.

“The US data has been weak over the last couple of weeks and the UK inflation number on day helped kick euro-sterling higher.”

Dealers have been surprised by the euro’s resilience given speculation the European Central Bank would have to ease policy further to avert the risk of deflation.

But with the euro zone economy sustaining signs of a slow pick-up, wagers on a move next month have been cut.

“One could expect that if the real economy is getting up and if we see that in Germany wage increases are quite substantial, there might be a certain self-correcting trend (in inflation),” ECB member Ewald Nowotny told Reuters in an interview.

“So we will see whether this needs some specific action or whether ... there would be a merit for waiting.”

In Asia, Japan’s Nikkei pared its early losses to end off 0.5 per cent, battling to maintain the momentum of Tuesday’s three per cent rally which followed a decision by the Bank of Japan to expand a scheme to encourage more bank lending.

Seoul lost 0.4 per cent, but Sydney edged higher on solid earnings results, while emerging markets focused on unrest in both Ukraine and Thailand.

Dealers had also kept a careful eye on China’s central bank after it drained funds from the money market on Tuesday, though it took no new action on Wednesday which helped the Shanghai market bounce by 1.1 per cent.

The People’s Bank of China (PBOC) is trying to engineer a gradual upward shift in the cost of money to encourage companies to deleverage and discourage high-risk shadow banking activity.

In commodity markets, gold slipped to $1,320.85 an ounce after running into selling at a 3-1/2-month peak of $1,331.10.

US crude rose to a fresh four-month high on forecasts of lower crude and oil products stockpiles due to new pipeline capacity and robust winter demand.

Nymex crude futures were 20 cents higher at $102.63, having jumped 2.4 per cent on Tuesday, while Brent crude edged down 37 cents to $110.09 a barrel.

Sensex gains

Indian stocks climbed, sending the the benchmark index to a four-week high, as software exporters and drugmakers advanced.

The S&P BSE Sensex increased 0.4 per cent to 20,722.97 at the close in Mumbai.

Infosys Ltd climbed for a fourth day, sending a gauge of technology companies to a three-week high. Ranbaxy Laboratories Ltd rallied the most in a week after agreeing to settle New York state claims that it colluded with Teva Pharmaceuticals Inc on generic-drug sales. Bharat Heavy Electricals Ltd, the nation’s largest power-equipment maker, rose for a second day.

The CNX Nifty Index on the National Stock Exchange of India Ltd. climbed 0.4 percent to 6,152.75.

Overseas investors bought a net $83.9 million of domestic shares on February 17, the most since January 16, data compiled by Bloomberg show.