* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Abhinav Ramnarayan
LONDON, June 30 (Reuters) - The euro came off yearly highs on Friday but was still set for its strongest quarter in six years as investors pile into the currency on a brightening euro zone economy and its implications for monetary policy in the bloc.
The single currency dropped 0.1 percent to trade at $1.1426, but in the April-June quarter the euro has climbed over 7 percent, putting it on track for its biggest quarterly gain since January-March 2011.
The euro shot to one-year highs after Tuesday’s speech by European Central Bank President Mario Draghi bolstered expectations that a reduction in stimulus measures would be signalled as soon as September.
Though policymakers looked to play this down in the days that followed, investors appear convinced that economic strength will push them to end stimulus sooner rather than later.
“This is partly a response to Draghi’s comments and also on the back of a euro zone economy that is firing on all cylinders and outperforming the rest of the developed economies,” said Investec economist Victoria Clarke.
Growth in the bloc outstripped that of the United States in the first quarter and set the stage for a strong 2017.
“It’s at a different stage in the cycle as the U.S. so I do expect some of that to cool in the second half of the year, but the growth momentum doesn’t seem to be going anywhere,” said Clarke.
Money markets in the euro zone are fully pricing in a rate rise from the ECB by July next year.
Conversely, the dollar was on course for its worst quarter in seven years on Friday, recovering only marginally against major peers.
“Obviously there’s a shift afoot. It really seems that there’s some coordinated effort going on out here among the G10 central banks,” said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore, referring to the series of hawkish-sounding comments on monetary policy.
Bank of England Governor Mark Carney surprised many on Wednesday by conceding a rate hike was likely to be needed as the British economy came closer to running at full capacity.
Sterling edged higher on Friday to $1.301, adding to Thursday’s 0.6 percent gain.
Two top policymakers at the Bank of Canada also suggested they might tighten monetary policy there as early as July.
The environment of tightening policy has seen stocks lose some of the lustre of recent months.
MSCI’s index of world stocks came further off recent highs, dropping 0.14 percent to add to Thursday’s sharp fall.
European shares were flat in early deals on Friday, but were set to end June with their biggest monthly loss in one year as worries over tightening monetary conditions soured the mood.
Earlier, the MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7 percent, after hitting a two-year high on Thursday. It is up 5.3 percent for the quarter and has risen 18.3 percent this year.
In commodities, oil prices continued their recovery this week on a decline in weekly U.S. crude production.
U.S. crude added 0.7 percent to $45.23 a barrel in its seventh straight session of gains, bringing its weekly increase to over 5 percent.
Global benchmark Brent gained 0.6 percent to $47.70 a barrel, poised for a nearly 10 percent rise for the quarter. (Reporting by Abhinav Ramnarayan; Additional reporting by Nichola Saminather in Singapore; Editing by Mark Potter)