* Euro up as global rescue plans boost risk appetite
* U.S. to inject $250 billion into banks, calming nerves
* Dollar down but off lows as economic anxiety persists
* Trichet speech awaited for clues on interest rates
(Updates prices, adds detail, adds comment)
By Steven C. Johnson
NEW YORK, Oct 14 (Reuters) - The euro rose on Tuesday as
investors bet European and U.S. government plans to pour cash
into troubled banks would help markets start climbing out of
the worst financial crisis since the 1930s.
Worries about the fallout from the credit crisis on the
world economy, however, knocked the euro off an earlier
one-week high, while the dollar pared earlier losses against a
basket of currencies <.DXY>.
The United States said on Tuesday it would pump $250
billion into banks, including the country's nine largest,
following similar plans in Britain, France and Germany.
[]
That encouraged risk appetite, boosting U.S. stocks and the
euro and hastening selling of the low-yielding yen. It also
loosened credit, with the interbank cost of borrowing dollars
for three months declining the most since March, according to
the British Bankers Association.
"This is what traders wanted to see -- bank balance sheets
being shored up -- and the best way to do it is with a direct
capital infusion. It's immediate and it should help lending
conditions ease," said Greg Salvaggio, vice president of
trading at Tempus Consulting in Washington.
"There's still anxiety out there, though, so we'll have to
see if this move gets traction," he said, adding the world
still faces a "significant recession."
Late morning in New York, the euro was changing hands at
$1.3660 <EUR=>, up 0.5 percent from Monday but off a session
peak of $1.3769. Against the yen, it was up 0.7 percent at
139.59, below 141.72, its high on the day. Last week, it hit a
three-year low at 132.25, according to Reuters data.
Against the yen, the dollar rose 0.2 percent to $102.20
<JPY=>, while sterling rose 0.6 percent to $1.7491 <GBP=>
The greenback rallied broadly last week as stock markets
swooned and investors pulled out of risky trades for the
relative safety of the dollar, a trend that has been
interrupted so far this week.
Late morning, the dollar was 0.4 percent weaker against a
basket of major currencies <.DXY> after earlier falling 1
percent. Instead, investors poured into higher-yield currencies
such as the Australian dollar <AUD=>, which rose 1.2 percent to
$0.7067, off a session peak above $0.72.
"We've seen a very strong relief rally after severe falls
on global stock markets, but to say that everything is over and
it's going to be hunky-dory from now on is premature," said
Niels Christensen, currency strategist at Nordea in
Copenhagen.
A dose of reality came with data from Germany's ZEW
research institute showing a bigger-than-expected slide in
investor sentiment in October, suggesting the euro zone's top
economy may be in for a prolonged slump. []
To that end, investors said they would be paying close
attention to a speech by European Central Bank President
Jean-Claude Trichet scheduled for 12:15 p.m. (1615 GMT) for any
hints of further euro-zone interest rate cuts.
The ECB cut rates by 50 basis points in concert with other
central banks last week, and markets expect more cuts by year
end.
(Additional reporting by Veronica Brown in London; editing by
Leslie Adler)
