LONDON, June 11: The euro rose against the dollar on Wednesday after inflation data from eurozone members France and Spain strengthened the case for interest rate rises by the European Central Bank, traders said.

The euro rose to $1.5563 in late London trading from 1.5464 in New York late on Tuesday.

Against the Japanese currency, the dollar fell to 106.74 yen from 107.38.

Annual French inflation soared to a 17-year high point of 3.3 per cent in May, powered by rising prices for food and fuel, official figures showed on Wednesday.

In Spain, inflation reached 4.7 per cent, its highest level in at least 11 years.

“Higher than expected French May inflation data aided the euro's rise and confirmed the ECB concerns over upside price pressures,” said ABN Amro analyst Melinda Smith.

The head of the European Central Bank (ECB), Jean-Claude Trichet, signalled last week that eurozone interest rates might increase next month, with analysts now expecting a rise of 0.25 percentage points.

Dealers said the foreign exchange market was also looking ahead to a meeting of Group of Eight finance ministers this weekend amid recent signs that Washington is seeking to bolster the US currency.

“US Treasury Secretary Paulson is reportedly preparing to give the dollar another verbal boost at this weekend's G8 meeting,” said Calyon analyst Stuart Bennett.

“The hardening of the US stance appears to draw a line in the sand with euro/dollar now seemingly unlikely to revisit its 1.60-dollar highs.”He added: “If it was not for equally hawkish comments from European Central Bank members the euro/dollar would be even lower.”

US Federal Reserve chairman Ben Bernanke toughened his message on inflation this week, adding to speculation that the US central bank may hike interest rates later this year.

At the same time, European Central Bank chief Jean-Claude Trichet has put markets on alert for a July interest rate increase because of high inflation in the eurozone.

Despite gains this week, the US dollar has fallen by about 15 per cent against the euro and more than 12 per cent against the yen in the past year.

Aggressive rate cuts by the Fed in recent months to bolster economic growth have weighed on the greenback.

Analysts said US officials appeared to be trying to talk up the dollar's value in a bid to cool import inflation, with the chances of actual currency market intervention to buy the greenback still seen as limited.

“We believe it's just verbal intervention,” said Hachijuni Bank forex dealer Sho Komamura, but added that the remarks still warranted caution.

Finance ministers from the G8 industrialised nations were to meet on Friday and Saturday in Osaka.

In London late on Wednesday, the euro changed hands at $1.5563 against $1.5464 late on Tuesday, at 166.11 yen (166.08), 0.7923 pounds (0.7912) and 1.6069 Swiss francs (1.6114).

The dollar stood at 106.74 yen (107.38) and 1.0328 Swiss francs (1.0419).

The pound was at 1.9639 dollars (1.9542).

On the London Bullion Market, the price of gold eased to $876.25 per ounce from $878 late on Tuesday.—AFP