By Richard Hubbard
LONDON (Reuters) - The rally in the euro and European shares advanced on Thursday as Greece edged closer to a bailout deal and on expectations the Bank of England and the European Central Bank will maintain support for the move into riskier assets.
Greek leaders have managed to agree most of the austerity measures needed to secure the release of 130 billion euros in funds necessary to meet debt repayments due in March and hopes are high a deal will be finalized later in the day.
The euro, which briefly hit a fresh two-month high of $1.3313 on optimism the Greek deal would be signed off, was up around 0.2 percent at $1.3280. The pan-European FTSEurofirst 300 <.FTEU3> index of top shares, which edged back from six-month highs on Wednesday, was 0.1 percent higher at 1071.53.
The ECB is not expected to make any policy changes at its Thursday meeting ahead of a second large three-year loan tender due at the end of the month, but the Bank of England, which also meets, is likely to increase its asset purchase program.
Reaction was muted to China's faster-than-expected annual inflation rate of 4.5 percent in January, above a 4.1 percent rise forecast. The outcome dampened expectations of an imminent move by the central bank to cut banks' required reserve ratios (RRR), the level of cash they must hold in reserve.
(Editing by Anna Willard)
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