* Option-related demand helps euro, but problems persist
* U.S. economy improved in May, Fed's Beige Book says
* Thursday's ECB meeting in focus
* Chinese exports said to rise, easing global growth fear
(Adds comments, details. Changes byline)
By Steven C. Johnson and Vivianne Rodrigues
NEW YORK, June 9 (Reuters) - The euro rose against the
dollar for a second straight session on Wednesday, boosted by
options-related demand and renewed market hopes that Europe's
debt crisis may not put the brakes on global growth.
Talk that Chinese exports in May likely grew sharply
bolstered confidence, while Federal Reserve Chairman Ben
Bernanke said the U.S. recovery was on solid footing. Please
see [] and [].
That provided traders with an opportunity to take profits
on the euro's recent slide, which took it below $1.19 on Monday
to its lowest level since early 2006. European and U.S. stocks
also rose and the premium investors demand to hold Spanish and
Italian bonds over benchmark German bunds fell [].
Few were ready, however, to declare the euro's woes over.
Banks' overnight deposits at the European Central Bank hit
a record on Wednesday, highlighting widespread worries about
the health of the financial system. []
In afternoon trading in New York, the euro was changing
hands at $1.2012 <EUR=>, up 0.3 percent. It hit $1.1876 Monday,
its lowest since March 2006. The euro has shed nearly 16
percent against the dollar this year.
Steven Butler, head of FX trading at Scotia Capital, said
that while the euro in the short term could reach $1.2110, "I
still think there's downside. And overall, this move over the
past few months has seen new lows hit, then consolidation and a
nasty bounce back before we make another assault downward," he
added.
Traders said option expiries at $1.1900 and $1.1850 added
to euro demand as investors bought the currency to protect
their positions.
The euro also gained against the yen, rising 0.2 percent to
109.86 yen <EURJPY=> after hitting an eight-year low beneath
109 yen on Monday.
The euro hit a record trough below 1.38 Swiss francs
<EURCHF=R> but later recovered. The Swiss National Bank has
been intervening since 2009 to limit franc strength, but
traders have speculated that further intervention may prove
futile given the euro's woes.
BEIGE BOOK
The dollar edged lower against the yen, or 0.1 percent to
trade at 91.34 yen <JPY=>.
U.S. economic activity improved nationwide last month, but
worries about Europe's debt crisis dented confidence, the
Federal Reserve said in its Beige Book collection of anecdotal
reports. []
Meanwhile, analysts said the market was still betting that
euro zone economic growth will lag growth in the United States
as heavily indebted countries are forced to slash spending in
exchange for access to emergency aid. The ECB is expected to
keep interest rates at a record low when it meets on Thursday.
Kathy Lien, director of research at GFT Forex, said markets
will watch on Thursday for clues whether the ECB plans new
efforts to support troubled euro zone countries. The central
bank began buying government bonds last month to cut some
countries' borrowing costs.
What happens "could determine whether the euro makes a move
back toward $1.19 or sustains gains above $1.20," she said.
The euro was also helped on Wednesday after sources said
that Chinese exports grew 50 percent in May from a year
earlier, which analysts said helped ease fears that Europe's
debt crisis would slow global growth. Europe is one of China's
largest export markets.
Some also said European efforts to cut budget deficits will
be constructive for the euro in the long run.
At the Reuters Investment Summit in New York this week,
Citigroup's chief currency strategist, Steven Englander, said a
weaker euro will make euro zone exports more competitive,
offsetting slower growth in Greece, Spain and other countries
facing severe spending cuts and tax hikes.
In long run, he said, "I think time is on the side of the
euro," provided countries cut budget deficits. []
(Additional reporting by Neal Armstrong in London; Editing by
Kenneth Barry)
