The euro continued riding high on Thursday thanks to a spike in euro zone debt yields, while in Asian equities volatile Chinese shares slid and tempered risk sentiment. China's CSI300 index .CSI300 lost 3.5 percent while the Shanghai Composite Index .SSEC dropped 3.6 percent as signs that more brokerages are starting to tighten margin trading also spoiled sentiment. The country's equities have also sagged recently on concern that waves of new share offerings will sap liquidity in other stocks. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.2 percent. Japan's Nikkei .N225 edged down 0.1 percent while Australian shares lost 1.3 percent. Risk appetite warmed in some quarters after Greece's international creditors signaled on Wednesday they were ready to compromise to avert a default. Still, with the debt situation murky at best, spreadbetters forecast a lower open for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .CAC. In foreign exchange, the European common currency rode the momentum gathered overnight when the European Central Bank raised its inflation forecast for 2015, in line with recent data suggesting deflationary pressures were not as pronounced as feared. ECB President Mario Draghi followed up by saying the central bank saw no reason to adjust its monetary policy stance following the recent surge in European bond yields. The prospect of the ECB not front-loading its bond purchases pushed euro zone yields up and propelled the euro higher. The benchmark German 10-year Bund yield DE10YT=RR climbed to within a hair's breadth of 0.90 percent overnight, from around 0.50 percent at the start of the week. The euro was steady at $1.1268 EUR=, having rallied about 2.5 percent so far this week. "Unless there is a very big upside surprise in Friday's U.S. labor market report, the EUR/USD should make its way towards $1.15. The road may be bumpy and the rally could stall at the May high of 1.1466 but the path of least resistance for the EUR/USD is higher," wrote Kathy Lien, managing director of FX strategy for BK Asset Management. U.S. Treasury yields rose in tandem with their European counterparts and while the dollar lost ground against the euro, higher yields helped it rebound modestly against the yen. The dollar was up 0.1 percent at 124.36 yen JPY= after pulling away from the previous day's low of 123.79. The currency had climbed to a 13-year high above 125 yen on Tuesday when the dollar enjoyed a broad rally on upbeat U.S. economic indicators. In commodities, crude oil struggled after sliding overnight on concerns generated by a big build-up in distillates and with OPEC expected to reject output cuts at its meeting on Friday. Brent crude LCOc1 fell 0.1 percent to $63.74 a barrel after plunging 2.6 percent the previous day. Source: Reuters
