* Euro rises from 7-week lows versus yen
* Solid demand at Irish, Spanish bond auctions
* U.S. data mixed but helps dollar versus yen
(Adds details, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Aug 17 (Reuters) - The euro rose against the
dollar and rebounded from a seven-week low against the yen on
Tuesday, as solid Irish and Spanish bond auctions eased
concerns about heavily indebted euro zone countries.
Ireland's sale of 2014 and 2020 paper was viewed as a
litmus test for investor appetite amid concerns about the cost
of cleaning up the country's banking sector. Sales of 12- and
18-month Spanish treasury bills also saw strong demand.
[]
But the euro struggled to hold above $1.29 on uneasiness
about the bloc's economic outlook, with a key German survey
sparking concerns about whether Europe's largest economy can
sustain a solid recovery.
"We've seen a pretty choppy market and a lot of that has to
do just with all the mixed messages we've been getting today,"
said Dan Cook, a senior market analyst at IG Markets in
Chicago.
In afternoon trading, the euro was up 0.5 percent at
$1.2887, with key support at a one-month low around $1.2732 hit
on Monday, traders said.
Analysts at Credit Agricole said while euro/dollar is
moving higher, momentum is waning while speculative positioning
reveals there's less room for short covering. "A lot of good
news is in the price," they said in a note.
The euro <EUR=> rose to a session high of $1.2915,
according to Reuters data, after the government bond auction
results as stop-losses were hit on the break of $1.2910.
The German ZEW institute's measure of investor and analyst
economic sentiment dropped well below forecasts, though this
was partly offset by an unexpectedly sharp jump in the current
conditions index. []
There was little impact from U.S. data showing a rise in
producer prices in July for the first time in four months and a
weaker-than-expected rise in housing starts, although the data
did decrease some deflation concerns. []
A third report indicating U.S. industrial production
expanded in July at twice the clip economists had expected did
help the dollar against the yen [].
"Forex markets are just taking a breather after the violent
swings of last week in euro/dollar and dollar/yen," said
Camilla Sutton, currency strategist at Scotia Capital in
Toronto. "Traders are still looking for a catalyst to take the
dollar in one direction or the other."
YEN GAINS LIMITED FOR NOW
Against the yen, the euro rose 0.7 percent to 110.28 yen
<EURJPY=>.
The dollar <JPY=> traded 0.2 percent higher at 85.55 yen
though analysts cautioned against reading too much into the
move. Earlier, the dollar slid to 85.11 yen on electronic
trading platform EBS <JPY=EBS>, nearing a 15-year low of 84.72
yen hit last week.
"The sentiment out there is there are still problems to
come, and with the 10-year yield at 2.60 percent, there's
absolutely no reason for the dollar to rally against the yen
right now," said Brian Dolan, chief currency strategist at
Forex.com, in Bedminster, New Jersey. "We expect another run at
85 yen and then a move to the 84.70-80 area."
Further yen gains were capped by concerns about possible
moves by Japanese policy makers to stem the yen's rise. A
government source said Prime Minister Naoto Kan and the central
bank governor were likely to meet next Monday. []
When asked about the meeting, Kan told reporters: "We have
been communicating with the BOJ in various ways as needed. We
hope to continue communicating as necessary with the central
bank." []
One-week implied volatility for dollar/yen <JPY1MO=> fell
to around 11.05 on Tuesday from above 12 percent last week.
(Additional reporting by Nick Olivari, Vivianne Rodrigues and
Steven C. Johnson in New York; Editing by Leslie Adler)
