Euro edges up in London

The euro edged up against the dollar on Wednesday, on some relief buying after a key German business sentiment index came in stronger than some in the market had been positioned for.
The dollar lost a little ground after an influential adviser to China's central bank told Reuters the time is right for the yuan to move in line with market forces and warned China could see serious shocks if investment overheating persists.
The German Ifo business climate index fell to 105.6 in July from 106.8 in June and below a consensus forecast of 106, but the number was still above what some had been expecting in the wake of disappointing data from some other eurozone countries.
"Most economists were forecasting downside risk and the market was set up for a weaker number than the consensus. There were rumours of 103," said Adam Cole, senior currency strategist at Royal Bank of Canada.
By 1130 GMT, the euro was a touch firmer on the day at $1.2590, up around 20 ticks from pre-Ifo levels. It hit a session high of $1.26 on the China comments.
The fall in the Ifo is unlikely to dent expectations for the European Central Bank to raise rates next week to 3.00 percent from 2.75 percent, analysts said.
The dollar fell a third of a percent to trade at 116.80 yen. The yen is often traded as a proxy for the tightly-controlled Chinese yuan. The euro slipped 0.2 percent to trade at 147.14 yen.
Yu Yongding, head of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said China could afford to let the yuan appreciate further and China could see serious shocks if investment overheating persists.
But the yen failed to build on its gains after Chinese Premier Wen Jiabao later called for "forceful measures" to prevent economic overheating and pledged to improve the yuan's flexibility over time.
"It's clear that China is joining global tightening game but it's also clear that currency policy is quite a way down the list of measures...they are likely to use (to tighten policy)," said David Simmonds, head of foreign exchange strategy at Royal Bank of Scotland.
The yen was also supported earlier by comments from a Bank of Japan policymaker warning of possible further rate rises this year. The Australian dollar rose more than half a percent on the day to hit a two-month high at US $0.7589, after a surprise jump in consumer prices in the second quarter hardened expectations that the Reserve Bank of Australia would raise rates from 5.75 percent next week.
The US dollar gained for a second straight day on Tuesday after the Conference Board's index of consumer sentiment rose in July and US sales of existing homes dipped in June by less than economists expected.