* Euro near 10-week high vs yen, British pound
* Euro looks to extend gains if Fed opts for more stimulus
* German court ruling reduces fear of imminent crisis
* Dutch election results also mildly supportive for euro
By Hideyuki Sano
TOKYO, Sept 13 (Reuters) - The euro held near four-month high on Thursday after Germany’s Constitutional Court gave a green light for Berlin to ratify the euro zone’s permanent rescue fund, looking to extend gains further on possible stimulus from the U.S. Federal Reserve.
The euro changed hands at $1.2903 in early Asian trade, near four-month high of $1.2937 hit a few hours after the German Constitutional Court’s ruling on Wednesday.
The court said the German parliament should be given veto rights over any increase in Germany’s current contribution of 190 billion euro, but the conditions it spelled out were less onerous than some had feared.
With the euro zone’s rescue fund now seen up and running soon and expectations the European Central Bank’s bond buying plan would help reduce borrowing costs of Spain and Italy, risk of a major crisis in the currency bloc seems to have receded, prompting buy-back in the euro.
The common currency also held near 10-week high against the yen, trading at 100.45 yen, just below Wednesday’s high of 100.64 yen. Against the British pound, it stood at 0.8010 pound, after having hit a 10-week high of 0.8028 on Wednesday.
Also slightly helping the euro were results of the Dutch election, where pro-European parties crushed radical fringes, dispelling concerns that eurosceptics could gain sway in a core euro zone country.
The euro is likely to extend gains further if the U.S. Federal Reserve unveils a new asset purchase programme, dubbed as QE3 as that would be its third round of quantitative easing, when it announces its policy at 1630 GMT.
Mounting expectations that the Fed might print more dollars, thereby cheapening their value, have been pushing down the dollar’s index to a four-month low of 79.522 on Wednesday .
Against the yen, the dollar stood at 77.77 yen, a hair above three-month low of 77.70 yen hit on Tuesday.
A Reuters poll showed economists raised their bets of a third round of Fed bond buying to 65 percent from 60 percent in August.
P rimary dealer banks, which do business directly with the Fed, saw an even stronger chance of asset purchases.
Many Fed watchers believe any new asset purchase program would be open-ended, unlike the past two cycles of quantitative easing. That would allow the central bank to review the size of its purchases on a frequent basis, perhaps meeting to meeting, and adjust the program as economic circumstances warrant.
“The market has not 100 percent priced in QE3 yet,” said Masafumi Yamamoto, chief FX strategist at Barclays, noting that whether the size of its monthly purchase would be larger than the pace under the previous QE of $75 billion would be important, whether the programme is open-ended or not.
In the Reuters poll, among the economists that saw a new stimulus program being open-ended, the median of forecasts for how big the initial installments would be came to $70 billion per month.