* Euro rises from last week's 14-month low vs dollar
* Aid package, ECB bond buying boost risky assets
* Unclear if package gives long-term support for euro
(Adds quote, updates prices, changes byline, changes dateline,
previous LONDON)
By Wanfeng Zhou
NEW YORK, May 10 (Reuters) - The euro rose broadly on
Monday, rebounding from last week's 14-month low against the
dollar after policymakers announced a $1 trillion emergency
package to stabilize the currency and euro zone central banks
began buying local government debt.
The aid package, hammered out by European Union finance
ministers, central bankers and the International Monetary Fund,
was the biggest since Group of 20 leaders rolled out support
measures after the collapse of Lehman Brothers in 2008.
The euro earlier climbed near $1.31 as the plan calmed
investor nerves and sparked a rally in risky assets. It then
retreated below $1.30 as the initial euphoria faded somewhat.
"It's clear that (policymakers) have, at least for the time
being, drawn a line under the liquidity concerns in Europe,"
said Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto. "As a result, we've seen risk appetite
return to the markets across different asset classes."
Euro zone central banks started buying up government bonds
on Monday, in a reversal of the European Central Bank's
resistance to full-scale asset purchases as it fights to
contain Greece's debt crisis. See []
Uncertainty persisted, however, over whether the package
could give the euro lasting support since Greece and other
peripheral euro zone countries must tackle fiscal deficits when
their growth outlook is deteriorating.
"Ultimately, the sustainability of this trend will depend
on whether the European countries can really implement the
fiscal austerity programs and through that create credibility,"
Strauss added.
In early New York trading, the euro <EUR=> was trading with
gains of around 1.3 percent at $1.2924 having earlier risen as
high as $1.3093, according to Reuters data.
The euro had fallen to $1.2510 on trading platform EBS last
week, coinciding with currency speculators boosting bets in
favor of the dollar to a level strategists said was the highest
since the euro's launch in 1999 [].
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on euro short positions, click on:
http://graphics.thomsonreuters.com/0210/EZ_ERCFTC0210.gif
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The single currency is still down about 9 percent since
January, making it the worst performing major currency.
The euro rose 3 percent to 120.34 yen <EURJPY=> after
hitting an eight-year low near just above 110 last week.
"There is some uncertainty lingering about the mechanisms
of the stabilization funds. In particular, it is still unclear
where the money for the funds is going to come from," said
Valentin Marinov, currency strategist at Societe Generale.
The dollar fell 1.1 percent against a basket of major
currencies to 83.534 <.DXY>. The U.S. Federal Reserve reopened
currency swap facilities with other major central banks on
Sunday to ease market strains in Europe.
The Fed revived facilities established during the 2007-2008
financial crisis with the European Central Bank, and the
central banks of Canada, the UK and Switzerland.
POLITICAL STALEMATE
Sterling rose 1.4 percent to $1.5005 <GBP=D4>, helped by a
broader recovery in risky assets, while the euro was up 0.1
percent at 86.17 pence <EURGBP=D4>.
Britain's opposition Conservatives and Liberal Democrats
resumed talks on Monday to reach a deal to govern
[]. Investors are concerned a political stalemate
will hamper efforts to tackle the UK's huge public deficits.
Such concerns pushed the pound to one-year lows of $1.4475
on Friday.
The Bank of England left interest rates at 0.5 percent and
decided not to undertake further quantitative easing purchases
at its Monetary Policy Committee meeting, as expected.
[]
(Graphic by Scott Barber, Additional reporting by Neal
Armstrong; Editing by Andrea Ricci)
