* Euro breaks above 2011 high, more gains seen
* Swiss franc hits record on Middle East, Africa turmoil
* ECB meets on Thursday, may sound hawkish on inflation
(Updates prices, adds quote, changes byline, dateline,
previous LONDON)
By Wanfeng Zhou
NEW YORK, March 2 (Reuters) - The euro rose to a near
four-month high versus the dollar on Wednesday and looked set
to extend gains on growing expectations interest rates in the
euro zone will rise earlier than those in the United States.
The Swiss franc soared to a record high versus the dollar
as Libyan leader Muammar Gaddafi launched an offensive against
rebels, sending investors to seek safety in the Swiss currency.
For the latest on Libya click on [].
The European Central Bank holds its policy meeting on
Thursday. With oil prices trading above $100 a barrel <CLc1>
<LCOc1> and euro zone inflation well above target, investors
expect the ECB to sharpen its anti-inflation rhetoric.
After struggling to break above key resistance at $1.3862,
its high for the year to date, the euro pierced that level as
North American trading got under way. The euro could make a run
toward $1.40 should the ECB strike a hawkish tone on inflation,
analysts said.
"The market seems to want to own euros right now," said
Greg Salvaggio, senior vice president of capital markets at
Tempus Consulting in Washington. "The perception is growing in
the market that the ECB will certainly be hiking rates sooner
than the Fed and that's really underpinned the euro for the
time being."
The euro <EUR=EBS> climbed as high as $1.3868, its
strongest level since Nov. 9, before easing slightly to trade
at $1.3863, up 0.7 percent on the day.
Traders reported large offer option-related offers ahead of
$1.39. Further upside targets include $1.3948, around the 76.4
percent retracement of the euro's fall from November to
January, and $1.3957, the 200-week moving average.
The dollar index <.DXY> last fell 0.6 percent to 76.627,
after hitting its lowest since early November of 76.614.
The U.S. currency has been unable to benefit from the
recent spike in risk aversion amid political tensions in the
Middle East and North Africa, prompting some investors to
question whether the dollar has lost its safe-haven status.
"People are starting to view the euro as a counter to the
dollar in times of turmoil simply because they both offer equal
security. However the euro is offering higher yields,"
Salvaggio said.
The dollar has come under pressure as investors focused on
the view that higher oil prices would push other central banks
to raise interest rates to counter inflation even as the
Federal Reserve maintains its stimulative monetary policy.
However, some analysts said if tensions deteriorate,
concerns about the impact of soaring oil prices on the global
economy could erode investor appetite for risk and help the
dollar regain its safe-haven status.
"If there is no resolution to the crisis in the Middle East
oil prices will stay elevated and people will stop focusing on
the inflationary impact. The euro is in favor now but in two to
three weeks it could be the dollar," said Simon Derrick,
currency strategist at Bank of New York Mellon.
The dollar fell 0.2 percent to 81.69 yen <JPY=>. It also
lost 0.7 percent to 0.9223 Swiss franc, after hitting a record
low of 0.9224 franc <CHF=EBS>.
(Editing by James Dalgleish)
