The euro rose to near a three-week high against the yen in Asia Thursday as the rise in Japanese equities following gains on Wall Street Wednesday encouraged investors to buy the risk-sensitive common currency.

Traders said growing confidence in the global economic recovery could push higher-yielding currencies like the euro up further in the coming days. But they also said investors are monitoring the spread of political protests in the Middle East, and may cut bets on riskier assets if conditions deteriorate.

For the rest of the global day, the primary focus will be on the U.S. consumer price index for January, due at 1330 GMT. Dealers said any lower-than-expected reading may have the biggest impact by weighing on the dollar, as many investors have already factored in expectations for continued price rises.

"The talk has been about continued price rises, so I'd say the bigger risk is to the downside if the CPI shows the inflation rate milder than anticipated," said Motonari Ogawa, a senior foreign exchange dealer at Barclays Capital.

The median forecast of economists surveyed by Dow Jones Newswires is for the CPI to rise 0.3% in January, according to the median forecast of economists surveyed by Dow Jones Newswires.

In Tokyo on Thursday, traders said buying by Asian funds and other investors pushed the euro up. The common currency hit Y113.40 against the yen, its highest level since Jan. 28. The single unit marked a high of $1.3610 against the dollar after triggering stop-loss buying orders around $1.3600, dealers said.

They said Iran's sending a warship through the Suez Canal and past Israel's Mediterranean coast added to potential risks to the euro and other risk-sensitive currencies. Unrest in the Middle East, where protests have raised questions about geopolitical stability in the important oil-producing region isn't yet having a major impact on the market. But that could change quickly.

"If we see the unrest spread even more--and particularly if it becomes a serious issue in Saudi Arabia--oil prices could spike, which could roil global financial markets and hurt the yen crosses," said Mitsuru Sahara, a senior foreign exchange dealer at Bank of Tokyo-Mitsubishi UFJ.

At 0450 GMT, the euro traded at Y113.47 compared with Y113.50 late Wednesday in New York, and at $1.3581 compared with $1.3570.

The dollar was at Y83.56 at 0450 GMT compared with Y83.69 late Wednesday in New York.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the euro and yen, was at 78.170 from 78.234.

Interbank Foreign Exchange Rates At 12:50 EDT / 0450 GMT
 
                         Latest     Previous   %Chg   Daily   Daily    %Chg
                                    2150 GMT          High    Low      12/31
Dollar Rates
 
USD/JPY Yen              83.54-58   83.65-68   -0.13  83.69   83.53    +2.86
EUR/USD Euro             1.3579-84  1.3567-68  +0.09  1.3608  1.3561   +1.56
GBP/USD Sterling         1.6102-07  1.6095-97  +0.04  1.6115  1.6085   +3.28
USD/CHF Swiss Franc      0.9590-92  0.9589-94  +0.01  0.9597  0.9574  -10.37
USD/CAD Canadian Dlr     0.9841-46  0.9848-56  -0.07  0.9853  0.9842   -1.88
AUD/USD Australian Dlr   1.0033-38  1.0030-37  +0.03  1.0052  1.0019   +2.52
NZD/USD New Zealand Dlr  0.7550-60  0.7553-59  -0.04  0.7558  0.7542   -3.04
 
Euro Rate
 
EUR/JPY Yen              113.47-50  113.49-52  -0.02  113.67  113.41   +4.50