Euro, Aussie dip in London

The euro fell back from one-month highs against the dollar and the Australian dollar dipped on Friday after China raised banks' reserve requirements by a further 50 basis points. China's tightening move, the fourth increase in reserve requirements in just over two months, offered further evidence the central bank is preparing to allow economic growth to slow as it battles inflation.
That prompted investors to pare back risk exposure, hitting equity markets and perceived higher-risk currencies. The Aussie was worst hit, given Australia's close trade links to China, but the euro also slipped back into negative territory on the day against the dollar, reversing an earlier surge that some felt had been overdone.
The euro fell more than a cent from an earlier one-month high around $1.3458 on EBS, with traders saying intraday stop-loss orders were triggered on the break below $1.3375 and $1.3350. Still, the single currency remained around 3.7 percent above a four-month low hit on Monday at $1.2860. The euro's earlier broad surge extended steep gains the previous day after European Central Bank chief Jean-Claude Trichet warned on inflation, prompting speculation the bank may raise rates earlier than thought.
The euro was down 0.2 percent at $1.3325, with technical analysts highlighting its failure to hold above the 100-day moving average at $1.3409 and what looked to be a false break into the Ichimoku cloud, a closely watched Japanese indicator, at $1.3399. The Australian dollar was down 1 percent on the day at $0.9870, off an earlier high of $0.9994.
The key euro-priced bank-to-bank lending rate jumped on Friday as expectations for a eurozone rate rise were brought forward after Trichet's inflation warning on Thursday. The dollar index was up 0.2 percent at 79.405, having earlier fallen as low as 78.806. It came under pressure after weak US jobless claims data on Thursday and as a jump in yields on top-quality 30-year US municipal bonds sparked concerns about regional US financing problems.
The euro was up 0.1 percent against the Swiss franc at 1.2880 francs, off an earlier one-month high of 1.2954. The Swiss currency was pressured ahead of talks between the Swiss government and business, bank and trade union representatives on the implications of the strong franc.