FOREX-Euro rises on Irish optimism; riskier assets rally

* Euro rises on cautious optimism over Irish budget

* Support likely to be fleeting, euro zone weaknesses remain

* Expectations for further Fed easing fuel risk appetite

(Adds quote, detail)

By Neal Armstrong

LONDON, Dec 7 (BestGrowthStock) – The euro rose 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 slipped against a currency basket after comments
from Fed Chairman Ben Bernanke stoked expectations of prolonged
U.S. monetary easing measures, supporting appetite for risk.

The euro remained vulnerable after euro zone policymakers
failed to come up 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.

“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 0.5 percent on the day at
$1.3375, after rising to $1.3394, more than 1 percent above
Monday’s low of $1.3246. Traders said strong demand from a UK
clearer and Middle East accounts helped it to rally in European


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:

PDF on yuan offshore market:


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.

Analysts said the fact the Federal Reserve could end up
buying more than its initial target of $600 billion in
government bonds made investors more positive towards riskier
assets and weighed on the dollar.

“The markets now think monetary policy will stay loose in
2011 and there’s no reason to think abundant liquidity will die
down soon,” said Stephen Gallo, head of market analysis at
Schneider Foreign Exchange.

“Risk appetite is up and the short U.S. dollar, long
commodities trade still looks to have legs,” he said.

The dollar was down 0.3 percent versus a currency basket
(.DXY: ) at 79.324, while European stocks rose more than 1 percent
on the day (.FTEU3: ). Commodities were generally firmer, with
U.S. crude for January (CLc1: ) rising to a 26-month high above
$90 a barrel. Gold hit record highs for the second day in a row.

The dollar was steady at 82.65 yen, off a three-week low of
82.34. Support was at the bottom of the Ichimoku cloud at around

The Australian dollar traded at $0.9957 (AUD=D4: ), close to a
three-week high of $0.9966. 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.

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]

FOREX-Euro rises on Irish optimism; riskier assets rally