Investing.com - The euro was trading close to two-and-a-half year highs against the dollar on Wednesday after a senior European Central Bank official said there are no signs of deflation in the euro zone.
EUR/USD hit 1.3905, the highest since Friday and was last up 0.28% to 1.3896, not far from Friday’s peaks of 1.3915, the highest level since October 31, 2011.
The pair was likely to find support at 1.3842, the session low and resistance at 1.3915.
The euro was boosted after ECB executive board member Benoit Coeure said the bank did not see any indications of deflation in the euro area, but it remained a possible risk.
"We don't see deflation in the euro zone. We see it as a possible risk, and we have to be ready to act against the risk if it materializes," he said.
He added that the central bank has a number of policy measures at its disposal to address the problem.
The euro strengthened broadly after the ECB left interest rates at a record low 0.25% at its policy meeting last week and implemented no new policy measures to shore up growth, despite forecasting low inflation for years to come.
Earlier Wednesday, data showed that euro zone industrial production was down 0.2% in January from a month earlier, dragged down by a 2.5% drop in energy output.
However, the underlying trend remained strong, with industrial output rising 2.1% on a year-over-year basis, after rising at an annual rate of 1.2% in December.
EUR/JPY edged up 0.135 to 142.94, moving off session lows of 142.24.
Elsewhere, the dollar remained lower against the yen, with USD/JPY down 0.18% to 102.83.
Safe haven demand continued to be underpinned as concerns over slowing growth in China spurred risk aversion.
Investors also remained wary as the standoff between Russia and the West over Ukraine intensified after the leaders of the G7 group of nations called on Russia to cease efforts to annex the Crimea region.