Investing.com - The euro hit two-and-a-half year highs against the dollar on Wednesday after a key European Central Bank official downplayed deflationary threats.
In U.S. trading, EUR/USD was trading at 1.3909, up 0.35%, up from a session low of 1.3843 and off a high of 1.3909.
The pair was likely to find support at 1.3834, Tuesday''s low, and resistance at 1.4169, the high from Oct. 31, 2011.
The euro firmed after ECB executive board member Benoit Coeure said the monetary authority saw no indications of deflation in the euro area, though the risk of softer prices remains a possibility.
"We don''t see deflation in the euro zone. We see it as a possible risk, and we have to be ready to act against the risk if it materializes," he said, and his comments firmed the euro by allaying expectations the ECB remains poised to cut rates or roll out fresh stimulus measures.
He added that the central bank has a number of policy measures at its disposal to address the issue.
The euro strengthened broadly after the ECB left interest rates at a record low 0.25% at its policy meeting last week and implemented no new policy measures to shore up growth despite forecasting low inflation for years to come.
Earlier Wednesday, data revealed that the euro zone industrial production contracted 0.2% in January from a month earlier, dragged down by a 2.5% drop in energy output.
Analysts were expecting a 0.5% gain.
However, the underlying trend remained strong, with industrial output rising 2.1% on a year-over-year basis, beating expectations for a 1.9% gain..
The euro was up against the pound, with EUR/GBP up 0.37% to 0.8373, and up against the yen, with EUR/JPY up 0.06% and trading at 142.85.
On Thursday, the ECB is to publish its monthly bulletin, which looks at current and future economic conditions from the bank’s perspective.
The U.S. is to release data on retail sales and import prices, in addition to the weekly government report on initial jobless claims.
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