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Euro zone data keeps euro away from lows, yen underperforms

Robust expansion in Germany and the euro zone's private sector helped the euro recover from recent lows on Thursday, although growing expectations that the ECB will ease monetary policy next week kept gains muted.

Earlier, better-than-expected Chinese data saw the safe-haven yen lose ground and helped the Australian dollar recover some of this week's losses.

China's factory sector, while still contracting slightly, turned in its best performance this year in May, holding out the hope of more revenues for an Australian economy which provides much of its raw materials as well as offering a boost to the broader global economic picture.

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As a result the yen, which is preferred during times of economic uncertainty, broadly underperformed.

The euro was 0.2 percent higher against the yen near 138 yen.

Against the dollar, the euro was steady near $1.37, rebounding from a three-month low above $1.36 struck a day earlier.

The euro had fallen early in the London session after data showed French business activity unexpectedly shrinking in May, but quickly recovered ground after the German purchasing managers' index was released.

All of which left the euro zone composite PMI for May at 53.9, bang in line with expectations, and slightly below April's reading of 54. Still, the data pointed to quarterly growth of around 0.3-0.4 percent, some economists said.

Dollar firm

The dollar kept a firm bid tone against the Swiss franc with talk in the market swirling on Wednesday of a big order for dollars just as Credit Suisse announced it will pay $2.5 billion in penalties for helping Americans evade taxes.

The dollar traded above 0.89 francs on Thursday, just off three-month highs struck on Wednesday.

The dollar also recovered from a 3-1/2-month low against the yen, rising 0.2 percent well above 101 yen, partly helped by the Chinese factory data and a pick up in U.S. yields.

U.S. 10-year Treasury yields, which have a good correlation with the dollar/yen pair, rose to 2.54 percent, compared with a trough of 2.473 percent set last week which was the lowest since late October.

Speculation about the possibility of any imminent ramp-up in the Bank of Japan's monetary stimulus has receded, but there are also signs that Japanese investors are building up their investments in Japanese stocks and foreign bonds.

—By Reuters

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