-- Euro tracks sideways between $1.3150 and $1.32, taking cues from European equities -- Swedish krona drops after the country's central bank sees low rates for longer -- Pound falls after poor jobs data and BOE minutes show continued split over more QE -- Bank of Canada decision at 1400 GMT eyed, no change expected By Jessica Mead An uneasy calm prevailed in currency markets during European trading hours Wednesday as foreign-exchange traders appeared to take their cues from moves in the equity markets, while the Swedish krona fell sharply after the Riksbank said its key interest rate would need to stay low for longer than previously thought. The euro, which Tuesday hit its highest level since late February at just above $1.32 against the dollar, traded sideways between $1.3150 and $1.32 throughout Wednesday's European session. An early selloff in German equities weighed on the common currency, but a rebound in European bourses gave it a subsequent boost. The euro has been supported by the Bank of Japan's aggressive monetary policy easing, which is expected to send a wave of capital into higher-yielding assets including the bonds of fiscally fragile euro-zone members. According to Hans Redeker, chief currency strategist at Morgan Stanley, the common currency has also been supported by the call from the International Monetary Fund Tuesday for countries that can afford it, such as the core euro-zone members, to slow the pace of their austerity measures. "The IMF's encouragement of further fiscal flexibility will likely be seen as a positive for the euro, allowing the weak data to be shrugged off," he said, citing the poor German ZEW sentiment survey Tuesday. The Swedish krona sold off sharply after the Riksbank left its main rate unchanged at 1% as expected, but said the rate would need to stay at this low level for longer than previously thought. The euro jumped almost 1% against the krona to trade as high as SEK8.4751. "The apparently sanguine attitude of the central bank to currency strength has been one of the main drivers for krona outperformance recently and the subtle shift is probably enough to put a floor in [the euro-krona exchange rate] around the recent lows just below SEK8.30, unless the euro weakens independently," said Adam Cole, chief currency strategist at RBC Capital Markets. Elsewhere, the pound came under pressure after February jobless data disappointed and the minutes from the April Bank of England rate-setting meeting showed that three members of the nine-strong Monetary Policy Committee continued to call for an additional 25 billion pounds ($38.3 billion) in asset purchases. "Sterling came under pressure after the minutes partly because they were testament to the policy paralysis at the MPC at the moment," said Valentin Marinov, senior currency strategist at Citigroup in London. In the session ahead, the Bank of Canada announces its rate decision at 1400 GMT, which could prove to be one of the most decisive for the Canadian dollar in recent memory according to UBS. "The weakness in data driven by correcting domestic imbalances has intensified of late, and although the market is looking for policy rates to remain unchanged, we see a strong chance that whatever is left of the central bank's tightening bias will be swept away in entirety," said Geoffrey Yu, senior currency strategist at UBS in London. Economists unanimously expect the central bank to maintain its overnight rate at 1.00%. At 1009 GMT, the euro was trading at $1.3163 against the dollar, compared with $1.3175 late Tuesday in New York, according to trading system EBS. The dollar was at Y98.13 against the yen, compared with Y97.53, while the euro was at Y129.15 compared with Y128.53. Meanwhile, the pound was trading at $1.5267 against the dollar, compared with $1.5363 late Tuesday in New York. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, was trading at 73.367, compared with 73.127 late Tuesday in New York. A summary of key levels for chart-watching technical strategists is below:

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