FOREX-Euro rises with risk appetite; funding doubts linger

* Risk appetite boosted by upbeat euro zone and U.S. data

* Euro helped by steady buying by Asian central banks

* Nagging worries over upcoming euro zone issuance

(Releads, adds detail, updates prices)

By Neal Armstrong

LONDON, Jan 4 (BestGrowthStock) – The euro rose against the dollar,
the yen and the Swiss franc on Tuesday after upbeat euro zone
and U.S. economic data boosted risk appetite, but its gains were
hampered by nagging doubts over euro zone bond issuance.

The Australian dollar fell as severe floods in north-east
Australia were expected to impact coal production, a major
contributor to its economy.

The single currency was helped against the dollar by steady
buying from Asian central banks after the euro area purchasing
managers’ index (PMI) was revised upwards on Monday from the
earlier flash estimate, indicating a pick up in the region’s
growth momentum.

Comments from a Chinese official, who said on Monday the
country would continue buying Spanish debt. [ID:nLDE702068] also
helped support the euro.

The single currency was up 0.4 percent from late U.S.
trading on Monday at $1.3404 (EUR=: ), but traders reported strong
offers from macro accounts and analysts remained sceptical about
its ability to rally further.

“I do not think these gains in the euro can be sustainable
and as volumes start picking up investors will focus on upcoming
heavy bond issuances from the euro zone,” Geoffrey Yu, currency
strategist at UBS.

In the next two months an estimated 150-200 billion euros of
government bonds are scheduled be issued by euro zone countries,
some of whom are struggling with rising budget deficits and
higher borrowing costs.

Data on Monday showed U.S. manufacturing grew at its fastest
clip in seven months in December and construction spending hit a
five-month high in November, helping to fuel a rise in global
equity markets. [ID:nN03175600]

“We are returning to normal levels of trading and the key
themes that people are coming back to is structural weakness in
the euro zone and worries about the Chinese economy,” said
Jeremy Stretch, head of currency strategy at CIBC World Markets.

The dollar rose 0.6 percent to 82.18 yen (JPY=: ) with traders
seeing offers around 82.50 and near-term resistance at the
55-day moving average of 82.60. The euro rose nearly 1 percent
to trade above 110 yen (EURJPY=R: ).

Markets were awaiting minutes of the Federal Open Market
Committee’s Dec. 14 meeting later in the session. Focus will
mainly be on U.S jobs data and Fed Chairman Ben Bernanke’s
testimony to the Senate, both due on Friday.

AUSSIE FALLS

The Australian dollar fell more than 1 percent to $1.0055
(AUD=D4: ), retreating from a 28-year peak around $1.0257 set on
Friday. Massive flooding in north-east Australia fuelled worries
over coal production. Traders said funds sold Aussie for euros,
taking profit on long Aussie positions taken in the run-up to
the end of 2010.

Against the Swiss franc, the dollar rose 1.2 percent to
0.9452 (CHF=: ), off an all-time low just above 0.9300 set on
Friday. The euro was up 1.4 percent against the franc (EURCHF=: ),
pulling back from last week’s record low of 1.2398 francs as
investors reversed some long Swiss franc positions built in
December.

Sterling also gained broadly as data showed UK manufacturing
activity grew robustly. The pound (GBP=D4: ) rose as far as
$1.5646 (GBP=D4: ), up more than 1 percent on the day.

(Additional reporting by Anirban Nag)

FOREX-Euro rises with risk appetite; funding doubts linger