FOREX-Euro rises on Irish optimism; debt fears prevail

* Euro rises on cautious optimism over Irish budget

* Support likely to be fleeting, euro zone weaknesses remain

* Dollar burdened by expectations of further Fed easing

(Changes dateline, adds comment, previous TOKYO)

By Neal Armstrong

LONDON, Dec 7 (BestGrowthStock) – The euro edged higher on Tuesday
on optimism Ireland will pass an austerity budget later in the
day, though support was expected to be fleeting, with the single
currency still dogged by structural weaknesses in the euro zone.

The dollar was broadly weaker, slipping to a three-week low
against the yen, after comments from Fed Chairman Ben Bernanke
stoked expectations of prolonged U.S. monetary easing measures.

The euro remained vulnerable with European policymakers
failing to come with new policies to tackle the region’s debt
crisis. [ID:nLDE6B51VW]

An Irish Times report suggesting the austere Irish budget
would be passed on Tuesday triggered cautious investor optimism.
[ID:nLDE6B60A6]

“The euro is gaining some support on optimism that the Irish
budget will be passed but I expect any rallies to be fleeting.
Structural weaknesses in the euro zone remain in place,” said
Lee Hardman, currency analyst at BTM-UFJ.

“It would be far more significant for the euro if the budget
wasn’t passed as this would bring down the Irish government and
exacerbate concerns about the debt crisis spreading,” he said.

The euro (EUR=: ) was up around 0.2 percent on the day at
$1.3335, after rising to $1.3372, over a cent above Monday’s low
of $1.3246. Traders said strong demand from a UK clearer helped
it to rally in European trade.

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Take a Look on euro zone debt crisis: [ID:nLDE68T0MG]

Scenarios on euro zone crisis: [ID:nLDE6B50PA]

Graphics package on Europe’s struggle with debt:

http://r.reuters.com/hyb65p

PDF on yuan offshore market: http://r.reuters.com/byg28q

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The picture was complicated by the dollar’s own weakness
after Bernanke did not rule out further bond purchases — a
theme that sent the greenback to an 11-month low last month.

Traders said the fact the Federal Reserve could end up
buying more than its initial target of $600 billion in
government bonds meant it was not out of the woods yet.

That view manifested itself most clearly in dollar/yen,
which fell to a three-week low of 82.34 yen (JPY=: ), after
Bernanke’s comments helped it break out of a rough 83.50-84.50
range. It later steadied to trade close to flat at 82.70.

The dollar fell briefly below its 55-day moving average at
82.53 yen. Support was at the bottom of the Ichimoku cloud at
around 81.70.

The dollar index (Read more about the global trade. ), which tracks the greenback’s performance
against a basket of major currencies, was slightly softer at
79.530, having fallen in the past three sessions.

The Australian dollar traded at $0.9924 (AUD=D4: ), close to a
two-week high of $0.9938 set on Friday. It dipped slightly after
the central bank kept rates on hold at 4.75 percent and said
inflation would be little changed over the next few quarters.

“We have February pencilled in at the moment (for the next
rate hike), but that sounds a little soon and we may have to
push that back a bit. Sometime in the first half of next year.”
said Michael Blythe, chief economist at Commonwealth Bank in
Sydney.

The Aussie also quickly recovered from initial losses from
talk about Chinese monetary tightening.

The official Chinese Securities Journal reported that
China’s central bank may raise interest rates this weekend to
enshrine its shift to a “prudent” monetary policy in the face of
rising inflation. [ID:nTOE6B6003]

(Additional reporting by Hideyuki Sano)

FOREX-Euro rises on Irish optimism; debt fears prevail