Euro eases in London

The euro eased from two-week highs against the dollar on Wednesday as investors took profits on the single currency's rally that came after strong German data boosted expectations of a euro zone interest rate hike.
Tuesday's drop in US consumer confidence contrasted with a strong German Ifo business climate index. Coupled with hawkish comments from a European Central Bank policymaker, it fanned expectations the dollar's interest rate advantage over the euro could narrow sooner rather than later.
But analysts say what the Ifo spike reflected was not independent German economic strength but rather a generalised upswing in global business confidence.
"The rally yesterday was spurred by the surge in optimism in the euro zone and hawkish rhetoric from the ECB (caused) a pronounced shift in interest rate expectations," said Steven Pearson, chief currency strategist at HBOS Treasury Services.
"But there is a synchronised pick-up in global business confidence. A global sell-off in fixed income markets means the dollar would benefit, because yields in the US will rise further than yields elsewhere."
By 1130 GMT the euro was 0.4 percent down on the day at $1.2065, after hitting a 2-week high of $1.2139 earlier.
The US confidence index for October fell to a two-year low of 85.0, fuelling concerns that soaring oil prices could curb US consumer spending. Germany's Ifo business climate index rose to a five-year high in October of 98.7.
ECB Governing Council member Weber said on Tuesday that the central bank was on high alert for inflation dangers although it was not preparing for an imminent rate rise.
The Ifo and Weber's comments boosted the market's expectations of a euro zone rate rise to a 60 percent chance of a move in December, compared with a 40 percent chance last week.
The single currency was steady on the day at 139.34 yen after hitting a six-month high around 139.50.
Traders reported euro buying interest by Japanese investors looking to buy euro zone bonds.
"Japanese investors are looking to buy euro zone bonds on an FX-unhedged basis. You would expect independent weakness in yen as capital outflows from Japan increase," Pearson said.
The yen has been under pressure in recent weeks due to outflows from Japanese investors, frustrated by near-zero interest rates at home, into higher-yielding assets.
The dollar was up 0.5 percent on the day at 115.61 yen, off last week's two-year high around 116.
The dollar's widening rate advantage over the euro and the yen has been the main driver of the US currency's bull run this year.