Euro, bond yields rise after Draghi comments on economy

LONDON (Reuters) - The euro rallied to a nine-day high and bond yields in the single-currency bloc nudged higher on Tuesday after comments form European Central Bank President Mario Draghi highlighted a recovering economy.

"Deflationary forces have been replaced by reflationary ones," Draghi said at the ECB's annual policy forum in Sintra, Portugal.

The euro hit a nine-day high of $1.1245, up from $1.1187 earlier, up nearly half a percent on the day.

Euro zone bond yields were 2-3 basis points higher on the day; Germany's benchmark 10-year Bund yield hit a session high of 0.27 percent.

"He (Draghi) has been speaking more about the medium term and the ECB being a bit more sure that inflation will return to target," said Cathal Kennedy, European economist at RBC in London.

"But I don't think the message is significantly different to what we have heard before. There seems to be a bit of market overreaction."

The pan-European STOXX 600 equity index touched a session low as Draghi spoke and was last down 0.6 percent.

(Reporting by the London Markets team; Editing by Nigel Stephenson)