FOREX-Euro rises vs U.S. dollar, yen in choppy trading

(Updates prices, adds comment, U.S. data)

* Euro recovers, helped by custody buying

* Euro supported above $1.30, but nervousness persists

* Yen down as BoJ's Shirakawa stays committed to easing

By Gertrude Chavez-Dreyfuss

NEW YORK, April 19 (Reuters) - The euro rallied against the
dollar o n T hursday in choppy trading after two days of losses,
boosted by institutional buying to adjust short positions
following generally solid Spanish bond auctions this week.

News that the International Monetary Fund has secured
commitments of about $320 billion in funding to help shield
member economies from the debt crisis in Europe also supported
the euro, some analysts said.

However, there is still a lot of skepticism in the market
about the liquidity in the euro zone financial system and the
sustainability of the region's debt. On the other hand, some
institutional investors are less pessimistic and are willing to
get out of their short positions and stay neutral.

"There are a lot of people, mostly in the real money
community, who are short euros, but who realize that these are
stale positions," said Douglas Borthwick, managing director at
Faros Trading in Stamford, Connecticut.

He cited the generally positive news overall in the euro
zone -- the solid Spanish auctions this week, IMF commitments to
help economies cope with the debt crisis and the fact that there
has been no disorderly default by any indebted peripheral
country.

"If you put all these things together, investors are a lot
more comfortable," said Faros. "It's not that people are
outright buying the euro to go long on it, but it's more looking
like they're buying the euro to get out of their short
positions."

In midday trading, the euro rose 0.1 percent to
$1.3135, after hitting a session low of $1.3068. Against the
yen, the euro climbed 0.5 percent to 107.14 yen.

Positioning indicators also suggested that market players
were already very short of euros versus the dollar, which could
limit short-term falls.

"The market is almost historically short of euros and long
of dollars, which will make it difficult to push euro/dollar
lower," said Arne Lohmann Rasmussen, head of currency research
at Danske Bank in Copenhagen.

He said Dankse forecast the euro to be at $1.32 in three
months and in six months, mainly due to market positioning.

Traders, however, said they were inclined to sell into any
euro rallies, with the rise in Spanish and Italian yields
undermining any optimism from the auction. Earlier, market talk
of a French downgrade had also undermined sentiment toward the
common currency.

"This is all emblematic of the fact that the market remains
very nervous about the state of credit in the euro zone," said
Boris Schlossberg, director of FX research at GFT Forex in
Jersey City, New Jersey.

Spain's Treasury issued 2.5 billion euros in two- and
10-year bonds, at the top end of the targeted amount. Yields on
the key 10-year bond were higher, however, reflecting fears that
Spain may miss budget deficit targets and concerns about its
banking sector.

The euro also modestly sold off after a report showed that
U.S. initial jobless claims were weaker than expected, which
slightly dampened risk appetite. A lower-than-expected reading
of business conditions in the U.S. Mid-Atlantic region and a
surprise fall in U.S. existing home sales added to the weakness.

The euro held above strong chart support at $1.30. But an
escalation of concerns about Spain's high level of debt, at a
time when the economy is faltering, would put the euro back
under pressure, potentially taking it toward the 2012 low of
$1.2624.

Many in the market said the euro would head lower in the
medium term given the risks that budget and debt problems in
Spain will worsen and uncertainty over the outcome of the French
presidential election, which polls suggest will result in a
leadership change.

Traders cited talk of hedge funds betting the euro will fall
to $1.25 soon after the French poll concludes early next month.

The safe-haven Japanese yen fell as equities gained and after
Bank of Japan Governor Masaaki Shirakawa stressed the central
bank's commitment to monetary easing.

The dollar rose 0.3 percent to 81.50 yen, triggering
reported stop-loss buy orders around 81.60 yen, with traders
citing flows related to the launch of a large investment trust
by a Japanese investment bank.