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CORRECTED-FOREX-Euro rises as investors pare bearish bets on euro zone hopes
June 5, 2012 / 1:46 AM / 5 years ago

CORRECTED-FOREX-Euro rises as investors pare bearish bets on euro zone hopes

 (Corrects milestones for euro in lead)	
 * Euro rallies vs dollar, yen
 * G7 finance ministers, central bankers to hold call Tuesday
 By Julie Haviv	
 NEW YORK, June 4 (Reuters) - The euro rebounded from last
week's two-year low against the dollar and more than 11-year low
against the yen on Monday as investors pared bearish bets on
hopes that European authorities will seek greater fiscal
integration within the euro zone.	
 The euro, which was ripe for a bounce given a recent record
high in net speculative short positioning, was buoyed by news
that France and the European Commission signaled their support
for an ambitious plan to use the euro zone's permanent bailout
fund to rescue the bloc's stricken banks. 	
 "Talk that European officials may be warming to the notion
of tighter fiscal discipline caused investors to scale back some
of their record anti-euro bets," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington, D.C.	
 "Still, much uncertainty remains about the health of the
global economy, a backdrop that should prove supportive to the
dollar and yen," he added.	
 In a sign of heightened global alarm about strains within
the 17-member euro currency area, finance chiefs of the Group of
Seven leading industrialized powers will hold emergency talks on
the euro zone debt crisis on Tuesday. 	
 While European officials are trying to reassure investors
they can contain an escalating crisis, many market participants
remain bearish on the single currency and believe the euro's
strength should prove temporary, especially if yields on Spanish
and Italian bonds hover near unsustainable levels.	
 The euro last traded 0.5 percent higher at $1.2498,
up from $1.2286 on Friday - its lowest since July 2010. Monday's
peak of $1.2509 was a four-day high.	
 Against the yen, the euro traded up 0.9 percent at
97.86 yen, well above Friday's 11-1/2-year low of 95.57 yen,
according to Reuters data.	
 	
 "On immediate glance this small bounce in euro/dollar looks
very similar to the corrective bounce witnessed in mid-May,
which subsequently failed and opened the door for a move to
Friday's low at $1.2286," said Gareth Sylvester, director at
Klarity FX in San Francisco.	
 "Accordingly, we would not put any real faith in a
euro/dollar low having been set at this stage," he said. "In
fact we would really need to see a break back above $1.2625/35
to begin to suggest that a short-term low had been seen and
prompt a deeper correction."	
 From a medium-term perspective, the broader risks suggest
that the euro may head toward $1.20 and then $1.18, Sylvester
said.	
 Market participants are eyeing Wednesday's European Central
Bank meeting, with some positioning for an outside chance of a
rate cut. 	
 "The outlook of the euro will depend on how ready and
willing the European Central Bank is to provide stimulus to the
European economy," said Kathy Lien, director of currency
research at GFT in Jersey City. "They (the ECB) have made it
clear that they want the solution to come from Europe's leaders,
but the recent deterioration in economic data and slide in asset
prices makes easier monetary policy inevitable." 	
 On Thursday, Federal Reserve Chairman Ben Bernanke testifies
before a congressional committee about the U.S. economy.
Friday's weak U.S. labor market data has raised expectations of
more Fed quantitative easing, a negative for the dollar.	
 Against the yen, the dollar rose 0.4 percent to 78.34 yen
, off Friday's trough of 77.65, its lowest since
mid-February, according to Reuters data.	
	
 (Additional reporting by Nick Olivari; Editing by G Crosse)	
 	
 

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