* Appetite for risk increases as equity markets advance
* European manufacturing, services data boosts euro demand
* US existing homes fall less sharply than expected
(Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, July 22 (Reuters) - The euro rose more than 1
percent against the dollar on Thursday after data on the U.S.
housing market and the euro zone manufacturing and services
sectors revived investors' appetite for risk.
The yen erased most early gains versus the dollar and
dropped sharply against other currencies as U.S. stocks
rallied, helping improve sentiment a day after Federal Reserve
chairman Ben Bernanke painted a gloomy outlook for the U.S.
economy.
"Traders have reverted to risk-seeking mode this morning,"
said Kathy Lien, director of currency research at GFT Forex in
New York, citing the rise against the yen on the U.S. housing
data. "The dollar received a boost because the data was not
nearly as bad as everyone had feared and because the median
price of a home sold rose 1.0 percent."
U.S. existing home sales fell 5.1 percent in June, an
industry group reported, less than the 8.1 percent decline
expected according to a Reuters poll. []
The euro <EUR=> was last up 1.1 percent at $1.2906, after
hitting a session peak at $1.2933 on electronic trading
platform EBS. It also gained 1.1 percent to 112.31 yen
<EURJPY=>.
James Chen, chief technical strategist at FX Solutions said
the euro/dollar "tentatively" broke above resistance at $1.2900
and further gains are likely.
"If another attempt at a $1.3000 breach takes place, key
upside resistance on such a bullish move resides in the
significant $1.3100 price region," he said.
The dollar was down 0.1 percent at 87.01 yen <JPY=>,
rebounding from a session low of 86.35, according to Reuters
data.
A survey showed the euro zone's private sector surged ahead
this month, with the pace of growth accelerating in both the
services and manufacturing sectors. See
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"There's been a reversal in risk appetite and market
sentiment," said Vassili Serebriakov, currency strategist at
Wells Fargo in New York. "The markets are focusing on the fact
that European economic recovery appears to be well on track."
The dollar was trading down 1 percent versus a currency
basket <.DXY> at 82.557 after slipping to a low 82.462.
Attention focused on the release of European bank stress
test results, due at 1600 GMT on Friday, although some sources
said the results might be released earlier. []
The euro has had a good run against the dollar in
anticipation of the test results, rising to a 10-week high
above $1.30 on Tuesday as traders bet most of the 91 European
banks being examined would pass. []
Some in the foreign exchange markets say the test results
could be positive for the euro if they reveal no unpleasant
surprises, but doubts linger whether the checks are tough or
transparent enough.
"The market has certainly bought the rumor going into this
week that the stress tests will be positive and people have
been going long euro/dollar," said Lauren Rosborough, currency
strategist at Westpac.
(Editing by Leslie Adler)
