China shares sink, euro rides high as yields spike,

CSI300 index loses 1.7%, Shanghai Composite Index drops 1.8%

The euro continued riding high on Thursday thanks to a spike in euro zone debt yields, while in Asian equities Chinese shares slid and tempered risk sentiment.

China's CSI300 index lost 1.7% while the Shanghai Composite Index dropped 1.8%. The country's equities have sagged recently on concern that waves of new share offerings will sap liquidity in other stocks.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1%.

Japan's Nikkei and South Korea's Kospi, on the other hand, gained 0.3% and 0.5% as some markets focused on hopes that Greece could be inching closer to a deal that would save it from default.

Risk appetite warmed in some quarters after Greece's international creditors signalled on Wednesday they were ready to compromise to avert a default.

In foreign exchange, the European common currency rode the momentum gathered overnight when the European Central Bank raised its inflation forecast for 2015, in line with recent data suggesting deflationary pressures were not as pronounced as feared.

ECB President Mario Draghi followed up by saying the central bank saw no reason to adjust its monetary policy stance following the recent surge in European bond yields.

The prospect of the ECB not front-loading its bond purchases pushed euro zone yields up and propelled the euro higher.

The benchmark German 10-year Bund yield climbed to within a hairsbreadth of 0.90% overnight, from around 0.50% at the start of the week.

The euro was steady at $1.1269, having rallied about 2.5% so far this week.

"Unless there is a very big upside surprise in Friday's US labor market report, the EUR/USD should make its way towards $1.15.  The road may be bumpy and the rally could stall at the May high of 1.1466 but the path of least resistance for the EUR/USD is higher," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.

US Treasury yields rose in tandem with their European counterparts and while the dollar lost ground against the euro, higher yields helped it rebound modestly against the yen.

The dollar was up 0.2% at 124.46 yen after pulling away from the previous day's low of 123.79. The currency had climbed to a 13-year high above 125 yen on Tuesday when the dollar enjoyed a broad rally on upbeat US economic indicators.

In commodities, crude oil struggled after sliding overnight on concern generated by a big build in distillates and with OPEC expected to reject output cuts at its meeting on Friday.

US crude fell 0.1% to $59.57 a barrel after plunging 2.6% the previous day.