USD/CAD rose to 1.0012, its highest since Feb 16 early American session and currently is quoting around 1.0005/10 recording a 0.4% gain since opening.
As for technical levels, next resistances could be found at 1.0015, the 1.0040/50 area and 1.0070, while supports are seen at 0.9985, 0.9955 and 0.9920.
* U.S. payrolls number broadly in line with expectations
* U.S. unemployment rate falls to 8.6 percent
* Focus on EU summit next week
(Recasts, adds U.S. data, comment, updates prices, changes byline, dateline, previous LONDON)
NEW YORK (Frankfurt: A0DKRK - news) , Dec 2 ( Reuters) - The euro rose for a fifth straight session against the dollar on Friday, bolstered by speculation that the European Central Bank may lend to weak euro zone countries through the International Monetary Fund.
The drop in U.S. unemployment rate to 8.6 percent last month also stoked the market's appetite for risk, even though the headline figure of 120,000 new jobs created was well short of the whisper number of 200,000 touted just before the release of the report. For more, click on.
The payrolls data also lifted the euro, which was on track for its best weekly gain since late October, and some of the risk-friendly currencies such as the Australian and New Zealand dollars.
Gains in the euro, however, kicked off after talk that the ECB would make loans available to the IMF (Berlin: MXG1.BE - news) for debt-ridden euro zone countries. That sparked hopes of some kind of solution to the European sovereign debt crisis.
"We've seen a lot of improvement lately -- the U.S. data is better, the sentiment surrounding Europe (Chicago Options: ^REURUSD - news) has improved in the last few days on the hope a grand plan, so all that is out there in the market,: said Bob Sinche, global head of currency strategy at Royal Bank of Scotland (LSE: RBS.L - news) in Stamford, Connecticut.
"This is good enough to consolidate the gains we've had. I think the euro around $1.35 is not a bad level at which to end the week."
In early New York trading, the euro was last up 0.3 percent at $1.35024. It hit a high $1.35505 on electronic trading platform EBS immediately after the U.S. non-farm payrolls data, currency's highest since Nov. 22.
Investors though were wary of buying the single currency aggressively, however, given that it has already rallied more than 1 percent this week and it remains vulnerable to the region's debt problems.
"I think the issue is that there is still so much risk associated with Europe. No one wants to be long the euro going into the weekend," said Michael Woolfolk, senior currency strategist, at BNY Mellon in New York.
In other currencies, the dollar was down 0.2 percent against a currency basket at 78.122. Against the yen, the dollar edged up 0.2 percent to 77.870 yen.
With the U.S. data out of the way, markets are now awaiting a European Union summit on Dec. 9 for signs of progress on the euro zone debt crisis.
French and German leaders are meeting next Monday to outline joint proposals to be discussed at next week's EU meeting, which is viewed as yet another make-or-break meeting for the 12-year-old currency bloc. (Additional reporting by Steven C. Johnson and Wanfeng Zhou; Editing by Chizu Nomiyama)
* Euro lifted by good demand at Spain's auction
* Short-covering may lift euro, but debt worries remain
* ECB's Draghi says downside risks have increased
* Strong U.S. ISM number adds to U.S. recovery hopes (Updates prices, adds quote, U.S. data)
NEW YORK (Frankfurt: A0DKRK - news) , Dec 1 (Reuters) - The euro rose for a fourth straight session against the dollar on Thursday, bolstered by generally successful Spanish and French debt auctions, although traders were inclined to view its gains as good selling opportunities.
Spain sold 3.75 billion euros of three bonds at the top of the targeted range, although its borrowing cost was the highest in 14 years and at levels seen as unsustainable for public finances. France also found demand for its sale of 4.35 billion euros of debt in several maturities. [ID:nL5E7N11J2]
The euro's gains have dissipated a bit in midday trading as stocks turned mostly negative, with traders saying investors are consolidating their positions ahead of Friday's all-important U.S. non-farm payrolls report.
"We have had some big moves in the euro the last couple of days and a lot of event risks so the market is taking a little bit of a breather and consolidating their gains before tomorrow's big U.S. employment number," said Steven Butler, director of foreign-exchange trading at Scotia Capital in Toronto.
Investors are looking at 122,000 new jobs added to the U.S. economy last month and a steady unemployment rate of 9.0 percent. A higher-than-expected number could whet risk appetite once again and lift risk-friendly currencies such as the euro.
The euro was last up 0.3 percent at $1.34811.
Traders said news that the International Monetary Fund will likely cut its global growth forecasts in late January took the steam out of the rally in risky assets. For the IMF (Berlin: MXG1.BE - news) story, click on [ID:nW1E7MS00Q].
On Wednesday, the euro had hit a one-week high of $1.35337 on trading platform EBS after central banks of the United States and the euro zone, as well as Canada, Britain, Japan (EUREX: FMJP.EX - news) and Switzerland cut the cost of dollar loans to the banking system. [ID:nL5E7MU118]
The euro also rose to a two-week high against the yen
A break above $1.3533 though could see the euro rise toward its Nov. 18 high of $1.3615, analysts said. If it fails to retest Wednesday's high, however, the rally may peter out.
An increase in the Institute for Supply Management's U.S. manufacturing index for November (Stuttgart: A0Z24E - news) to 52.7 pushed the euro up against the dollar above $1.35 earlier as it increased the market's appetite for risk and reinforced the view that the world's largest economy is on a stable path to recovery. For the data, click on [ID:nN1E7B008U].
In midday trading, the dollar index was down 0.1 percent at 78.277, though off the 77.923 low hit on Wednesday.
Shaun Osborne, chief currency strategist at TD Securities in Toronto, said hints from French President Nicolas Sarkozy about considerable progress on fiscal integration within the euro zone could see a push toward $1.3554 in the euro. He added, though, that the market's strategy remained selling the euro on any significant rally.
Many analysts are awaiting Sarkozy's speech on the euro- zone crisis at around 12:30 p.m. (1730 GMT) for an update as to what euro-zone policy-makers have planned to prevent the crisis from spreading to other healthier economies in the region.
On Thursday, European Central Bank President Mario Draghi highlighted the euro zone's fragile outlook, saying downside risks to the economy have increased and that the bank's temporary measures are only limited. For more click on [ID:nF9E7LQ00L], [ID:nL5E7MU5LM].
That reinforced a market view that the ECB could cut interest rates and extend its liquidity measures when it meets to decide on monetary policy next week -- and this could well negate the euro's rally.
More important for markets will be whether European leaders are able to agree on a comprehensive solution to tackle the debt crisis at a European Union summit on Dec. 9. (Editing by Jan Paschal)
* Short covering, ECB boost euro ahead of weekend
* Debt crisis still points to weaker single currency
* Interbank funding strains boost dollar demand (Updates prices, adds quotes and graphics)
NEW YORK (Frankfurt: A0DKRK - news) , Nov 18 (Reuters) - The euro rose against the dollar on Friday on the possibility the European Central Bank will lend to the International Monetary Fund to bail out bigger euro zone economies and as borrowing costs for Italy and Spain eased.
Sentiment on the euro, however, remained bearish, with the common currency headed for a third straight week of losses as fears persisted that the debt crisis could engulf major euro zone states such as France and trigger a break-up of the 17-nation bloc.
Yields on Italian and Spanish bonds eased after the ECB stepped in to stabilize the market, but fears remain that both countries' borrowing costs are at unsustainable levels. [ID:nL5E7MI24O]
Euro zone officials said there have been discussions that the ECB could lend to the IMF (Berlin: MXG1.BE - news) to provide the fund with enough money to bail out even the biggest euro zone countries. [ID:nL5E7MH2MW] Pressure has also mounted on the ECB to step up its bond purchases.
Either approach would be satisfactory, said Andrew Busch, senior currency strategist at BMO Capital Markets in Chicago, "The broader point is that the ECB is finding a way to stabilize the European debt crisis," he said.
"This third-party lending arrangement not only works around ECB laws, but also provides an avenue for the ECB to create enough funding to stabilize the crisis while maintaining its appearance of independence," he added.
The euro last traded up 0.5 percent at $1.3524 on Reuters data, pulling away from a five-week low of $1.3420 struck on Thursday. On the week, the euro was down 2 percent versus the dollar.
The euro's improvement reflects hope for a solution, rather than strong confidence that such a solution will be achieved, said Nick Bennenbroek, head of currency strategy at Wells Fargo.
"For the next week and in the context of choppy trading, our bias is for U.S. dollar strength and global currency weakness."
Many analysts believe the only way to stem the contagion in Europe (Chicago Options: ^REURUSD - news) is for the ECB to buy up large quantities of bonds, effectively the sort of "quantitative easing" undertaken by the U.S. and British central banks.
Bond market participants polled by Reuters saw a 50/50 chance that the ECB will expand bond purchases to engage in outright quantitative easing. [ID:nL9E7J203E]
Support for the euro lies near $1.3405, the 76.4 percent retracement of last month's rally from around $1.3144 on Oct (KOSDAQ: 039200.KQ - news) . 4 to a high of $1.4247 on Oct. 27.
Spanish elections set for Sunday could help support a rise in the euro against the dollar in the very near-term, because the opposition party, which is seen as favoring austerity measures, is expected to win. But most see a downward trend in the euro.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Analysis of policy options [ID:nL5E7MF2XJ]
Other stories on euro zone debt crisis [ID:nL5E7LR1WL]
Countdown for euro zone rescue [ID:nL5E7MF2XJ]
Analysis on difficulty of breakup [ID:nL5E7MF1PJ]
Euro zone crisis in graphics http://r.reuters.com/hyb65p
Interactive timeline http://link.reuters.com/rev89r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
With investors shunning euro zone assets, funding strains were increasing for euro zone financial institutions. The premium for swapping euros into dollars rose, with the three-month cross-currency basis swap hitting its highest level since the 2008 financial crisis. [ID:nN1E7AG18W]
Analysts said high funding costs were pushing banks into shorter duration funding and could spread into spot currency markets, weighing on the euro. [ID:nL5E7MG4HG]
Against the yen, the dollar slid as low as 76.575 on trading platform EBS , the weakest level since Japan (EUREX: FMJP.EX - news) 's massive intervention on Oct. 31. It was last down 0.1 percent at 76.92. (Additional reporting by Wanfeng Zhou in New York and Nia Williams in London; Editing by Leslie Adler)
* Short covering, boosts euro ahead of weekend
* Debt crisis still points to weaker single currency
* Interbank funding strains boost dollar demand (Updates prices, adds details, comments, changes byline, dateline, previous LONDON)
NEW YORK (Frankfurt: A0DKRK - news) , Nov 18 (Reuters) - The euro rose against the dollar on Friday on speculation the European Central Bank may start lending to the International Monetary Fund to bail out troubled euro zone economies and as Italian and Spanish bond yields retreated.
Sentiment toward the euro remained bearish, however, and the common currency was headed for a third straight week of losses, as fears persisted that the debt crisis could engulf major euro zone states such as France and trigger a break-up of the bloc.
The European Central Bank again intervened in the secondary market to help ease tensions on debt issued by some of the troubled countries. Pressure was growing on the ECB to step up its bond-buying activity after Italian and Spanish yields hovered near unsustainable levels.
"Some relief in European bond markets and ongoing speculation about how the ECB might help have provided some temporary relief to markets," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
"We see today's rally as temporary and continue to prefer to play the euro from the short side," she added.
The euro rose more than 1 percent to a session peak of $1.3614 on Reuters data, pulling away from a five-week low of $1.3420 struck on Thursday. It last traded at $1.3562, still up 0.8 percent on the day.
Some investors closed their bets against the euro ahead of the weekend, which also boosted the euro, and gains accelerated after automatic buy orders were triggered around $1.3550.
Support lies near $1.3405, the 76.4 percent retracement of last month's rally from around $1.3144 on Oct (KOSDAQ: 039200.KQ - news) . 4 to a high of $1.4247 on Oct. 27.
Speculation of the ECB taking a more forceful role in stemming the debt crisis has gained traction in recent days. On Thursday, European officials said there have been discussions about the central bank possibly lending to the global lender, which would give it enough money to bail out bigger euro zone countries. [ID:nL5E7MH2MW]
Bond market participants polled by Reuters saw a 50/50 chance that the ECB will expand bond purchases to engage in outright quantitative easing. [ID:nL9E7J203E]
FUNDING STRAINS
While the euro could push higher in the near term as a short squeeze continues, the prevailing trend remains for a lower euro.
"Courageous market participants can sell the euro around $1.3550-60, we would start shortening euro/dollar at $1.3650," Commerzbank (Other OTC: CRZBF.PK - news) bank strategists wrote to clients.
There are signs that investors have stopped shifting money into the relatively safer German bunds and are instead abandoning the euro zone altogether, with German bond yields no longer falling as peripheral yields rise.
With investors shunning euro zone assets, funding strains were increasing for euro zone financial institutions. The premium for swapping euros into dollars rose, with the three-month cross-currency basis swap hitting 138.5 basis points on Friday, the highest since the 2008 financial crisis. [ID:nN1E7AG18W]
"So far this has not had a dramatic effect on the euro, but it is likely to be behind some of the recent weakening," said FxPro's chief economist Simon Smith.
Analysts said high funding costs were pushing banks into shorter duration funding and could spread into spot currency markets, weighing on the euro. [ID:nL5E7MG4HG]
The safe-haven Japanese yen and Swiss franc gained. The dollar slid as low as 76.575 , the weakest since Japan (EUREX: FMJP.EX - news) 's massive intervention on Oct. 31, and was last down 0.3 percent at 76.78. The dollar also lost 0.9 percent to 0.9129 Swiss franc . (Additional reporting by Nia Williams in London; Editing by Chizu Nomiyama)
Fri Nov 18, 2011 12:16am EST
* Euro in downtrend though dump approaching to be light -trader
* Mounting risk hatred supports dollar
* Aussie trims detriment after dipping next relation vs USD
* Worries grow as European bank appropriation condition tightens
By Masayuki Kitano
SINGAPORE, Nov 18 (Reuters) – The euro edged aloft on
Friday as traders lonesome brief positions and requisitioned profits
after a new dump to a five-week low, and a single
currency was approaching to sojourn on a downtrend given of the
spiralling euro section debt crisis.
The spotlight fell on Spain on Thursday, that had to pay
the top rate to sell a 10-year debt given 1997, only shy
of a 7 percent symbol seen as unsustainable.
The euro, however, showed some resilience in a arise of the
Spanish bond auction, handling to reason above a five-week trough
of $1.3421 strike in Thursday’s Asian trade.
The euro is being upheld by brief covering, pronounced Jesper
Bargmann, Asia conduct of G11 mark FX for RBS in Singapore, adding
that such profit-taking seductiveness is approaching to insist and limit
the speed of a euro’s declines.
“Market is really fervent to sell a euro and also fervent to
take some profits,” Bargmann said. “So we are saying seductiveness on
the dips to buy.”
“There’s copiousness of two-way seductiveness in a euro now,” he
added. “There’s a lot of brief positions out there and people
are fervent to book some profit. So it’s not an easy trade.”
The euro rose 0.2 percent to $1.3484, though is still
down roughly 2.4 percent for a week, on lane for a biggest
weekly commission decrease given early September.
Selling vigour opposite a singular banking has intensified
this week as misunderstanding in euro section bond markets widespread to
AAA-rated France.
The euro is approaching to exam a early Oct low of $1.3145
eventually, though a skirmish will substantially be gradual, said
Bargmann.
“I consider we’ll mangle $1.30 though we consider it’s going to be in a
fairly nurse fashion,” he said, adding that there were likely
to be some spikes and bouts of short-covering in between.
Support for a euro lies during around $1.3405, a 76.4
percent retracement of a Oct rally. The bottom of the
weekly Ichimoku cloud also offers support nearby that level,
coming in during $1.3408.
A merchant for a Japanese brokerage in Tokyo pronounced there was
talk that a euro choice position with a strike during $1.35 was set
to end today, and that players holding such a position may
buy a euro on dips and sell into rallies.
“The instruction is substantially toward a downside though looking at
how a marketplace has been relocating and positioning, we have to be
wary of short-covering,” a merchant said.
DOLLAR FUNDINS STRAINS
The deepening of a euro zone’s debt predicament has caused
heightened highlight in dollar appropriation markets this week.
The reward for swapping euros into dollars rose on
Thursday, with a three-month cross-currency basement barter around
6 basement points wider during -136 basement points, a many given the
2008 financial crisis.
“The delayed suit sight pile-up continues, with USD appropriation now
clearly a bigger emanate as contamination spreads some-more deeply into
Spain,” pronounced Sebastien Galy, strategist during Societe Generale.
The Australian dollar, that tends to come underneath vigour in
times of marketplace stress, dipped to as low as $0.9973 earlier,
matching a five-week low overwhelmed on Thursday.
The Aussie after pared some waste to change hands at
$1.0002, down 0.1 percent from late U.S. trade on
Thursday.
“While risks to a downside seem some-more apparent, it’s
worth observant that a banking is now oversold on several
momentum-based indicators,” pronounced David Scutt, a merchant during Arab
Bank Australia in Sydney.
“Keeping this in mind, should any good news surrounding
Europe strike a screens, it’s approaching to see a Aussie spring
higher on a behind of brief covering.”
Against a yen, a dollar dipped 0.1 percent to 76.87 yen
, with investors heedful of serve Japanese movement in the
wake of a large involvement on Oct. 31.
* Euro in downtrend but drop likely to be gradual -trader
* Mounting risk aversion supports dollar
* Aussie trims loss after dipping below parity vs USD
* Worries grow as European bank funding condition tightens (Updates levels, adds comments)
SINGAPORE, Nov 18 (Reuters) - The euro edged higher on Friday as traders covered short positions and booked profits after its recent drop to a five-week low, and the single currency was expected to remain on a downtrend because of the spiralling euro zone debt crisis.
The spotlight fell on Spain on Thursday, which had to pay the highest rate to sell its 10-year debt since 1997, just shy of the 7 percent mark seen as unsustainable.
The euro, however, showed some resilience in the wake of the Spanish bond auction, managing to hold above a five-week trough of $1.3421 hit in Thursday's Asian trade.
The euro is being supported by short covering, said Jesper Bargmann, Asia head of G11 spot FX for RBS (LSE: RBS.L - news) in Singapore, adding that such profit-taking interest is likely to persist and limit the speed of the euro's declines.
"Market is very eager to sell the euro and also eager to take some profits," Bargmann said. "So we are seeing interest on the dips to buy."
"There's plenty of two-way interest in the euro now," he added. "There's a lot of short positions out there and people are eager to book some profit. So it's not an easy trade."
The euro rose 0.2 percent to $1.3484, but is still down roughly 2.4 percent for the week, on track for its biggest weekly percentage decline since early September.
Selling pressure against the single currency has intensified this week as turmoil in euro zone bond markets spread to AAA-rated France.
The euro is likely to test its early October low of $1.3145 eventually, but its descent will probably be gradual, said Bargmann.
"I think we'll break $1.30 but I think it's going to be in a fairly orderly fashion," he said, adding that there were likely to be some spikes and bouts of short-covering in between.
Support for the euro lies at around $1.3405, the 76.4 percent retracement of the October rally. The bottom of the weekly Ichimoku cloud also offers support near that level, coming in at $1.3408.
A trader for a Japanese brokerage in Tokyo said there was talk that a euro option position with a strike at $1.35 was set to expire today, and that players holding such a position may buy the euro on dips and sell into rallies.
"The direction is probably toward the downside but looking at how the market has been moving and positioning, you have to be wary of short-covering," the trader said.
DOLLAR FUNDINS STRAINS
The deepening of the euro zone's debt crisis has caused heightened stress in dollar funding markets this week.
The premium for swapping euros into dollars rose on Thursday, with the three-month cross-currency basis swap around 6 basis points wider at -136 basis points, the most since the 2008 financial crisis.
"The slow motion train crash continues, with USD funding now clearly a bigger issue as contagion spreads more deeply into Spain," said Sebastien Galy, strategist at Societe Generale (Paris: FR0000130809 - news) .
The Australian dollar, which tends to come under pressure in times of market stress, dipped to as low as $0.9973 earlier, matching a five-week low touched on Thursday.
The Aussie later pared some losses to change hands at $1.0002, down 0.1 percent from late U.S. trade on Thursday.
"While risks to the downside appear more apparent, it's worth noting that the currency is now oversold on several momentum-based indicators," said David Scutt, a trader at Arab Bank Australia in Sydney.
"Keeping this in mind, should any good news surrounding Europe (Chicago Options: ^REURUSD - news) hit the screens, it's likely to see the Aussie spring higher on the back of short covering."
Against the yen, the dollar dipped 0.1 percent to 76.87 yen , with investors wary of further Japanese action in the wake of its massive intervention on Oct (KOSDAQ: 039200.KQ - news) . 31. (Additional reporting by Ian Chua in Sydney, Hideyuki Sano in Tokyo; Editing by Kavita Chandran)
* Spanish bond yields soar after poor auction
* ECB buying helps bond yields retreat, lifts euro
* Italy's Mario Monti outlines reforms to boost confidence (Updates prices, adds details)
NEW YORK (Frankfurt: A0DKRK - news) , Nov 17 (Reuters) - The euro edged higher from a five-week low against the dollar on Thursday after bond yields in some of the heavily indebted euro zone countries eased from extreme levels, but gains were likely short-lived on fears the debt crisis is spreading.
U.S. data showing initial jobless claims at a seven-month low last week and a smaller-than-expected fall in housing starts also boosted appetite for risk and lifted the euro.
Italian bond yields fell back below the critical 7 percent, a level widely deemed unsustainable, as Prime Minister Mario Monti unveiled sweeping reforms to dig the country out of crisis. The spread between French 10-year bond yields and German bunds also eased from record highs.
That helped the euro bounce back above $1.35 after three straight days of decline. The outlook for the common currency remains bleak, however, and it would likely resume weakness next week should the $1.36 level hold, analysts said.
"If you look at some of the PIIGS (Portugal, Italy, Ireland (Xetra: A0Q8L3 - news) , Greece and Spain) yields, they have started to become fairly negatively correlated to euro/dollar," said Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida.
The euro rose 0.4 percent to $1.3517, having risen as high as $1.3539 on Reuters data. It had earlier fallen to a five-week low of $1.3420. Below there, key downside target lies near the Oct (KOSDAQ: 039200.KQ - news) . low of $1.3140.
The premium of Spanish and French bonds over German Bunds hit fresh euro era highs after poor demand at their debt sales raised fears that the euro zone crisis could spiral out of control and potentially lead to a break-up of the bloc.
Spain saw its borrowing costs rising to their highest since 1997, close to the psychologically important level of 7 percent, while Paris had to pay markedly more to sell 7 billion euros of government debt.
"The Spanish auction was really bad and yields are rising to levels where there are expectations that fresh margin calls will be imposed," said Nomura currency analyst Geoff Kendrick. "The only way to trade euro is to sell. It is headed lower and our year-end target of $1.30 looks to be tested soon."
ECB BUYING
The European Central Bank buying of Italian and Spanish debt markets before and after the debt sales helped ease some pressure on yields but looked modest in size, traders said.
Pressure has grown on the ECB to take a greater role in tackling the crisis with Paris saying it should intervene more forcefully, but Germany and the ECB itself oppose that view.
Simpson said it's key for the ECB to at least continue what it's been doing until the European Financial Stability Facility (EFSF) is finalized and in operation.
"Right now if the ECB pulled away completely from its bond buying activity, we probably would see yields go through the roof. They've been basically the only buyers."
Against the yen, the euro rose 0.3 percent to 104.01 , rebounding from a five-week low of 103.37 set Wednesday. The dollar slipped 0.1 percent at 76.96 yen .
The outlook for euro zone assets took another beating after rating agency Moody's downgraded 12 German public sector banks. Analysts said investors will shy away from the region until policymakers take more concrete and forceful actions.
"It is becoming increasingly clear that the crisis in Europe (Chicago Options: ^REURUSD - news) is unfolding like a slow-motion car crash which is odd given that largely speaking all the facts seem to be known, i.e. too much debt and a concern about it being paid back," said Dave Floyd, managing partner and head of FX trading at Aspen Trading Group, based in Bend, Oregon.
"Thus one can only assume it has been the pathetically slow and some would say half-hearted attempts by politicians to put steps in place to reassure markets that have seemingly paralyzed the markets." (Editing by Chizu Nomiyama)
* Stocks, commodity currencies fall in risk-averse market
* ECB buying push bond yields lower, initially lifts euro
* Euro zone official says no aid for Italy under EFSF
(Recasts, updates prices, adds comment, changes byline)
NEW YORK (Frankfurt: A0DKRK - news) , Nov 17 (Reuters) - The safe-haven dollar rose for a fourth straight session on Thursday in a risk-averse market that saw stocks and commodities sell off on concerns euro zone banking and fiscal problems could spread to healthier economies.
Commodity (Euronext: COMIN.NX - news) currencies such as the Australian, Canadian, and New Zealand dollars as well as emerging market units posted sharp losses as investors grew frustrated the two-year old debt crisis is far from being resolved.
"I think this euro zone crisis could worsen before it gets better," said James Keegan, chief executive officer and chief investment officer at Seix Investment Advisors, in Upper Saddle River, New Jersey.
Keegan, who oversees assets of about $26 billion, pointed out that the threat of contagion is real and it is "questionable whether the euro zone as an entity would survive."
Bond yields in some of the debt-ridden euro zone countries such as Italy dropped from extreme levels, which suggested easing investor anxiety about the region's debt crisis. That initially underpinned the euro, but the support faded on more negative headlines on Italy.
One was on a comment from a euro zone official saying there are no plans for any financial assistance program for Italy under the euro zone bailout fund. [ID:nP6E7L300I].
By mid-afternoon, the dollar index, a gauge of its value against six currencies, rose 0.3 percent to 78.269 .
The euro was up slightly at $1.34748, having risen as high as $1.35403 on trading platform EBS. It had earlier fallen to a five-week low of $1.34210. Below there, key downside target lies near the Oct (KOSDAQ: 039200.KQ - news) . low of $1.3140.
Traders cited bids in the $1.3440 area.
Italian bond yields fell back below the critical 7 percent, a level widely deemed unsustainable, as Prime Minister Mario Monti unveiled sweeping reforms to dig the country out of crisis. The spread between French 10-year bond yields and German bunds also eased from record highs.
That helped the euro bounce back above $1.35 after three straight days of decline. The outlook for the common currency remains bleak, however, and it would likely resume weakness next week should it fail to go beyond $1.36, analysts said.
U.S. data showing initial jobless claims at a seven-month low last week and a strong rebound in future home construction also boosted appetite for risk and lifted the euro. For a wrapup in U.S. economic data, click on [ID:nN1E7AG0BT].
ECB BUYING
The European Central Bank buying of Italian and Spanish debt markets before and after the debt sales helped ease some pressure on yields but looked modest in size, traders said.
Pressure has grown on the ECB to take a greater role in tackling the crisis with Paris saying it should intervene more forcefully, but Germany and the ECB itself oppose that view.
Ronald Simpson, director of currency research at Action Economics in Tampa Florida said it's key for the ECB to at least continue what it's been doing until the European Financial Stability Facility (EFSF) is finalized and in operation.
"Right now if the ECB pulled away completely from its bond buying activity, we probably would see yields go through the roof. They've been basically the only buyers."
Seix's Keegan does not think the ECB would aggressively intervene in the fixed income market, much like what the Federal Reserve did in the U.S. bond market under its quantitative easing program.
"That bar for the ECB to come in is so much higher," Keegan said, adding that the bank would need to see a Lehman-type event before it actually steps in.
Against the yen, the euro was flat at 103.663 , rebounding from a five-week low of 103.40 set earlier on EBS. The dollar slipped 0.1 percent at 76.940 yen .
(Additional reporting by Wanfeng Zhou; Editing by Andrew Hay)
