Euro holds firm

LONDON (AFP) - The euro rode higher against the dollar on Tuesday after news that eurozone inflation turned negative for the first time and as dealers awaited fresh economic data in the United States.

In late morning trading here, the European single currency rose to 1.4104 dollars from 1.4088 dollars in New York late on Monday.

Against the Japanese currency, the dollar fell to 95.48 yen from 96.04 yen on Monday.

Currency traders were waiting for fresh cues from a string of US economic figures, including housing and consumer data out later in the day, followed by key monthly jobs on Thursday.

Inflation in the 16 countries using the euro turned negative in June for the first time on record, with prices falling 0.1 percent over 12 months, an official estimate showed on Tuesday.

The data from the Eurostat statistics agency put eurozone inflation at the lowest point on records going back to 1996 and was down from the 0.0 percent that the agency booked in May.

"The prospect of negative inflation rates during the summer was already priced in by the market so neither the euro/dollar nor European bond prices showed any strong pattern following the release," said Credit Agricole economist Frederik Ducrozet.

"Euro/dollar is likely to remain trapped between firm support around 1.3888 and resistance at 1.4269 as the market remains in its usual waiting stance ahead of the non-farm (US) payrolls and the ECB meeting on Thursday.

"Regarding the latter, we continue to expect a status quo on both the conventional and the unconventional monetary policy decisions."

The drop in eurozone consumer prices puts further pressure on the ECB which tries to keep annual inflation within a comfort zone that it defines as close to but less than 2.0 percent.

Eurozone interest rates are widely expected to stay at an all-time low of 1.0 percent when ECB governors meet on Thursday in Luxembourg, analysts say.

In trading here on Tuesday, the euro was changing hands at 1.4104 dollars against 1.4088 dollars late on Monday, 134.57 yen (135.28), 0.8482 pounds (0.8499) and 1.5246 Swiss francs (1.5246).

The dollar stood at 95.48 yen (96.04) and 1.0818 Swiss francs (1.0823).

The pound was at 1.6616 dollars (1.6568).

On the London Bullion Market, the price of gold advanced to 941.90 dollars an ounce from 935.50 dollars an ounce late on Monday.