Euro creeps higher after ZEW survey

LONDON (AFP) - The euro rose on Tuesday on unexpectedly strong German investor sentiment, but gains were capped by disappointment that a eurozone meeting had not resulted in a rescue for Greece.

In late morning deals here, the European single currency firmed to 1.3695 dollars, from 1.3671 late in New York on Monday.

Against the Japanese currency, the dollar edged up to 90.63 yen from 90.50 yen on Monday.

German investor confidence was stable in March, as experts expected the economy to slowly recover in the coming months, the ZEW economic research institute said in Frankfurt on Tuesday.

"German business activity has moved from the intensive care unit to the rehab. But it is still far from full recovery," a statement quoted ZEW president Wolfgang Franz as saying.

The financial sector indicator dipped to 44.5 points, the lowest level since July, as a brighter outlook the industrial front appeared to offset concern over the Greek debt crisis on equity, bond and foreign exchange markets.

The barometer stood at 45.1 points in February and analysts polled by Dow Jones Newswires had expected it to come in at 43 points this month.

"The euro reacted positively to the upside surprise in the German ZEW," said Credit Agricole CIB analyst Isabelle Job.

"Euro/dollar should nevertheless remain on the back foot as the Eurogroup meeting yesterday was not decisive.

"An agreement to provide financial assistance to Greece in case of emergency seems to have been reached but the lack of technical details failed to reassure markets.

"Greece should also be at the top of the agenda of the EcoFin today, but it seems unlikely that any clarification concerning this arrangement will be unveiled."

European finance ministers were poring over last-resort eurozone plans to rescue Greece if necessary with billions of euros in crisis loans at dissuasively high interest rates.

European Union partners made it clear that there is little intent to press the ideas into practice, Brussels seeing the mechanism as a necessary evil that must be prepared only if the health of the euro currency is endangered.

Greece has already complained that the yield on bonds it sells in order to raise money on international markets is too high at above six percent -- but eurozone ministers intimated any EU aid would also come at a heavy price.

With ministers expected to echo their eurozone counterparts by endorsing the measures, Athens has already undertaken to curb spending and raise taxes.

Market players were meanwhile cautious ahead of the US central bank's Federal Open Market Committee (FOMC) policy-setting meeting, which concludes Wednesday.

In London on Tuesday, the euro was changing hands at 1.3695 dollars against 1.3671 dollars on Monday, at 124.11 yen (123.73), 0.9072 pounds (0.9082) and 1.4516 Swiss francs (1.4521).

The dollar stood at 90.63 yen (90.50) and 1.0601 Swiss francs (1.0618).

The pound was at 1.5093 dollars (1.5050).

On the London Bullion Market, the price of gold rose to 1,114 dollars an ounce from 1,104.25 dollars an ounce on Monday.