LONDON, Jan 04, 2011 (AFP) - The euro climbed against the dollar on Tuesday as investors digested rising eurozone inflation and upbeat German unemployment data, and flocked to risky assets after the holiday break, dealers said.
The Japanese yen meanwhile dipped as risk appetite increased amid rising global stock markets and an improving US economic outlook.
In late morning deals, the European single currency rose to 1.3406 dollars, compared with 1.3356 late in New York on Monday.
Against the Japanese unit, the greenback increased to 82.15 yen from 81.70 yen on Monday.
"The euro has started 2011 on a firm note with euro/dollar breaking the 1.3400 ahead of the inflation release," said Credit Agricole CIB analyst Frederik Ducrozet.
However, he added: "Even stronger inflation and monetary data ... is unlikely to lead to an immediate reaction from the European Central Bank, which looks firmly on hold for now."
Eurozone inflation was expected to accelerate to 2.2 percent in December 2010, the first time for two years that the indicator has risen above 2.0 percent, the EU's statistics agency said on Tuesday.
The 12-month rate rose from 1.9 percent in November and October, when prices remained just below the 2.0-percent point which the ECB has set as its target for price stability underpinning healthy economic growth, Eurostat said.
A long-term rise in prices above two percent across the 17 nations that make up the currency area -- since Estonia joined on January 1 -- could generate so-called second-round inflation which arises when businesses and people begin to anticipate further price rises.
That was the first rise above 2.0 percent since November 2008 and the highest inflation figure since October 2008 when prices rose 3.2 percent. Inflation that year subsequently fell to 2.1 percent and has remained under the two percent ceiling since.
"Given ongoing tensions in the sovereign debt markets, the ECB is unlikely to feel any immediate pressure to hike rates," added Ducrozet.
Traders also absorbed official data which showed that German unemployment dropped last year to 7.7 percent of the workforce from 8.2 percent in 2009, owing to strong recovery in the biggest economy in Europe.
Improvement was seen across the country and in all age brackets, the labour office said, as Germany pulled out of its worst post-war recession and activity expanded by what might be the fastest rate since reunification in 1990.
Dealers expect choppiness for the next several days as the overall market flow has not returned to full volume from thinner holiday trading, with some participants still on vacation.
In London on Tuesday, the euro changed hands at 1.3406 dollars against 1.3356 dollars late in New York on Monday, at 110.13 yen (109.13), 0.8581 pounds (0.8624) and 1.2629 Swiss francs (1.2470).
The dollar stood at 82.15 yen (81.70) and 0.9420 Swiss francs (0.9332).
The pound was at 1.5621 dollars (1.5483).
On the London Bullion Market, the price of gold eased to 1,406.38 dollars an ounce from 1,410.25 dollars late on Monday.
