LONDON (AFP) — The euro climbed further against the dollar and the yen on Tuesday, buoyed by world governments' major moves to rescue the global banking sector, dealers said.
In late London trading, the euro climbed to 1.3662 dollars from 1.3576 dollars in New York late on Monday.
Against the Japanese currency, the dollar firmed to 102.31 yen from 102.01 yen on Tuesday.
Sterling jumped against the US unit after news that British 12-month inflation surged to a 16-year high of 5.2 percent in September due to soaring energy bills. However, analysts expect inflation to plunge in the coming months as oil prices cool further.
Currency markets also appeared to brush off gloomy economic forecasts from Germany, which surveys said was headed for recession, and a dip in industrial production in the eurozone.
"The fear of a systemic collapse has decreased. Therefore risk appetite of global investors is increasing gradually," said Commerzbank analysts in a statement.
Global equities soared for a second day running on Tuesday, with Tokyo posting its biggest-ever gain after governments worldwide threw lifelines to ailing banks amid one of the worst financial crises of the past century.
"The stabilisation in financial markets should continue to weigh upon the dollar and yen, which were the main beneficiaries from the turbulence over the past few weeks," said Barclays Capital analyst David Woo.
In recent weeks, the dollar had strengthened as investors sought shelter, in what is seen as a relatively "safe" currency, from collapsing stock markets and economic meltdown. The yen meanwhile had found support on the view that Japan would remain relatively untouched by the credit crunch.
But "the yen has been undermined by the plethora of government initiatives announced over the past couple of days to restore confidence to the global financial system," said Lee Hardman, Bank of Tokyo-Mitsubishi.
US authorities on Tuesday pushed forward a massive financial rescue with a plan to inject up to 250 billion dollars in capital to struggling banks and offer new guarantees to help restore credit flows.
European leaders have meanwhile unlocked more than one trillion euros in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.
"Because the European policies announced so far are more concrete and powerful, the euro and pound keep rallying against the dollar," said Marito Ueda, currency dealer at FX prime.
"The firmer dollar against the yen reflects improved investor confidence following rallies on stock markets," he said.
"Markets are watching if further policy measures will come from the US government and if stocks markets will really calm down."
In late trading in London, the euro changed hands at 1.3662 dollars against 1.3576 late Monday, at 139.41 yen (138.50), 0.7774 pounds (0.7832) and 1.5486 Swiss francs (1.5451).
The dollar stood at 102.31 yen (102.01) and 1.1362 Swiss francs (1.1379).
The pound was at 1.7528 dollars (1.7331).
On the London Bullion Market, the price of gold rose to 832.50 dollars an ounce from 831.50 dollars late Monday.
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