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Euro hits three-month high

The euro today hit a three-month high against the dollar, drawing some more support from a sustained surge in euro zone government bond yields that still succeeded in keeping global stock markets on the defensive.

Euro hits three-month high

Investors digested figures from the previous day that showed relatively strong euro zone economic growth in the first quarter. The euro jumped above $1.14, bringing its gains against the U.S. currency in the last month to nearly 9 percent as the difference between benchmark U.S. and euro zone 10-year yields plunges from the euro-lifetime high touched in March.

European stock markets were badly hit today with with investors worried about volatility and the tightening of financial conditions resulting from the plunge in bond prices and spike in yields.

Asian stocks were broadly flat with Japan's Nikkei 225 index losing 1 percent, weighed down by the yen's strength against the sagging dollar.

"The euro is continuing to rebound, supported by the ongoing adjustment higher in euro zone yields. (This)... is in part supported by strengthening growth in the euro zone and higher inflation expectations," said Lee Hardman, currency strategist at BTMU in London.

The euro went up more than 0.5 percent on the day at $1.1415, as the U.S.-German 10-year yield spread narrowed to a three-month low of 152 basis points. The yield advantage in favor of the dollar was over 190 basis points in mid-March.

This pulled the dollar index, a measure of its against a basket of six currencies, down to a four-month low of 93.175.

The weak U.S. retail sales report on Wednesday forced the investors to push back the likely lift-off date for a rate hike by the Federal Reserve, giving gold a steer to five-week highs above $1,218 an ounce. But this did not reverse the bond selling, as German and U.S. bond yields still surged to their highest in over five months.

In commodity markets, U.S. crude futures were off 37 cents at $60.14 a barrel, while Brent lost 25 cents to $66.56.