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Euro rises despite weak eurozone inflation

The euro climbed slightly against the dollar on Tuesday despite weak eurozone inflation data that pointed to the European Central Bank cutting interest rates to support a fragile recovery.

New YORK: The euro climbed slightly against the dollar on Tuesday despite weak eurozone inflation data that pointed to the European Central Bank cutting interest rates to support a fragile recovery.

Eurozone inflation slowed sharply to 0.5 percent in May, down from 0.7 percent in April, official data showed Tuesday. That was far weaker than the ECB's target of just below 2.0 percent.

The level is the same as in March, which was the lowest for the 18-nation bloc since the worst months of the financial crisis in 2008 and 2009.

"Today's weak numbers from Europe made for a more airtight case for the ECB to at least cut lending rates at its monthly gathering on Thursday," said Joe Manimbo, senior market analyst at XE.com.

"With sentiment decidedly bearish on the euro and with economic help seemingly on the way from the ECB, the euro has so far taken the poor news in stride."

Economist Azad Zangana at investment firm Schroders said the ECB was now under pressure to deliver major policy loosening.

"The market expects at least a cut in the main policy interest rate, along with a cut to the deposit rate," Zangana said.

Meanwhile, Bank of Japan Governor Haruhiko Kuroda repeated his view Tuesday that the central bank would not hesitate to pull the trigger on more easing if necessary to boost the economy and achieve a target of stable 2.0 percent inflation by next year.

"I don't think the measures are limited," he told parliament.

Dollar investors were cautious ahead of a batch of US economic data on Wednesday, said Kathy Lien of BK Asset Management.

Payrolls firm ADP reports on May employment changes ahead of Friday's May jobs report, the Institute for Supply Management reports on activity in the massive US services sector and the Federal Reserve releases its Beige Book on economic conditions.

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