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Political worries caps euro's rise

Monday, February 11 11:43:13

The euro edged away from a two-week low while oil and European equities stayed close to multi-month highs today, as worries over political developments in Europe were offset by signs of a pickup in world trade.

However, activity was light in the absence of any major economic drivers and after the Lunar New Year holiday shut most Asian financial centres, with the focus on an upcoming meeting of euro area finance ministers.

Analysts were not expecting much to come from the meeting, but after comments by the president of the European Central Bank Mario Draghi last week about the euro's rise, they are on watch for any talk about the currency's recent strength.

Political scandals in Spain and Italy, signs of tensions between the core European partners France and Germany, and worries about a Cyprus bailout are also weighing on the positive sentiment towards European assets seen since the start of 2013.

The euro edged up 0.1 percent to $1.3380 on Monday, though in Asian trade earlier it touched a two-week low of $1.3325 as it extended the sell-off that knocked around 2.5 percent off its dollar value last week.

Sentiment towards the euro has shifted since it hit a 15-month high of $1.3711 on Feb. 1, a shift given extra momentum last week when European Central Bank president Mario Draghi suggested further strength could lead to an interest rate cut.

Draghi's comments came at a time of rising concern in the markets over the prospect for "currency wars" as major trading nations try to boost their export competitiveness.

"What we saw last week was what amounted to verbal intervention from Mario Draghi on the euro," said Mike Ingram, market commentator at BGC. (C ) Reuters