* Euro near resistance at the early Feb high of $1.3862
* Divergent euro zone-U.S. rate view boosts euro/dollar
* But oil prices coming off peaks lend dollar support
* Dollar near record low vs Swiss franc
By Jessica Mortimer
LONDON, Feb 25 (Reuters) - The euro hovered near 2011 highs
against the dollar on Friday, helped by inflation-fighting
rhetoric from euro zone policymakers, while concern that unrest
in Libya might spread kept the Swiss franc near a record high.
A weekly close above the early February high of $1.3862
would leave the euro well placed for further gains towards
$1.40, but this level was seen as strong resistance, with the
dollar's falls tempered as oil prices came off 2-1/2 year highs.
Growing expectations for higher interest rates in the euro
zone while policy in the U.S. remains loose have supported the
euro, with European Central Bank policymaker Axel Weber saying
on Thursday the only direction for rates was up. []
Bank of Italy Governor Mario Draghi, seen as a leading
candidate for the ECB presidency, said in a newspaper interview
the bank would have to guarantee that inflation expectations
remain well anchored.
"The contrasting policy outlooks for Europe and the U.S.
have helped the euro and weighed on the dollar, and it wouldn't
be surprising to see the euro test the early February highs,"
said Kit Juckes, currency strategist at Societe Generale.
He said a close above that level would be "significant" for
the euro technically.
The euro was steady at $1.3802 <EUR=>. A break past $1.3862
would mark its highest level since early November. Beyond there,
resistance lies at $1.3947, the 76.4 percent retracement of a
November to January slide, and at $1.3974, the euro's intraday
high on Nov. 9.
Against a basket of currencies, the dollar <.DXY> was steady
at 77.080, near a 3-1/2 month low of 76.881 but helped a little
as oil prices came off recent highs due to a slight easing of
concern about supply disruption from the Middle East. []
The dollar has failed so far to gain any safe haven support
as a result of the tensions in North Africa and the Middle East,
which have mainly benefited the Swiss franc and the yen as
investors pared exposure to riskier assets.
Higher oil prices are seen as having a bigger impact on the
U.S. economy given its reliance on consumer spending for growth.
However, Societe Generale's Juckes said the dollar would
probably gain from a flight to safety if the tensions were to
escalate to the point where investors fear there is a serious
threat to the global economic recovery.
Analysts also said further euro gains may be limited if the
focus switches back to euro zone fiscal problems, with a lot of
debt issued by its struggling peripheral countries due to mature
in April.
MARKET SEEN LONG SWISS FRANC
The dollar edged up 0.1 percent to 0.9272 Swiss francs
<CHF=>, though it was not far from a record low of 0.9229 francs
hit on trading platform EBS late on Thursday.
But with many market players now probably long on the Swiss
franc, the currency may face some liquidation of long positions,
especially if oil prices stabilise, market players said.
"That safe-haven trade of going long Swiss may just turn
around a little bit," said a trader at a U.S. investment bank.
The dollar was steady against the yen at 81.93 yen <JPY=>
while the euro edged up slightly to 113.10 yen <EURJPY=R>.
In a sign that market players are not expecting the Middle
East unrest to trigger an acute bout of risk aversion, implied
volatilities on dollar/yen options <JPYVOL> quickly lost steam.
One-month dollar/yen volatility slipped back below 10
percent after shooting above that threshold earlier this week.
"I suspect the market's focus will shift back to the
(economic) recovery story from the Middle East by the time we
have U.S. payroll data next week," an options trader in Tokyo
said.
The Australian dollar rose 0.1 percent to $1.0102 <AUD=D4>,
underpinned by strong gains against its New Zealand counterpart
<AUDNZD=R>, as investors priced in prospects of a cut in New
Zealand interest rates following an earthquake.
The Aussie rose to a 10-year high of NZ$1.3509 <AUDNZD=R> on
diverging outlooks for interest rates.
(Additional reporting by Hideyuki Sano in Tokyo and Masayuki
Kitano in Singapore; editing by Patrick Graham)
