* Euro <EUR=> rises 1 pct vs dlr <EUR=> as equities gain
* Rally is risk-driven; Aussie/dlr hits 1-month high
* Obama fiscal stimulus plans could undermine dollar
(Adds quote, details, updates prices)
By Neal Armstrong
LONDON, June 14 (Reuters) - The euro rose on Monday as an improvement in sentiment towards riskier assets hit the dollar and prompted a bout of short-covering in the single European currency, lifting it further away from a recent four-year low.
European equity markets gained sharply, following rises in Asia. U.S. stock futures were 0.7 percent higher <SPc2>.
"The dollar was softer overnight against the euro as steady sentiment helped risk currencies recover further," said Geoffrey Yu, currency strategist at UBS.
"Equity markets globally performed solidly, especially on the back of expectations that policy will remain relatively loose for an extended period globally."
By 1115 GMT, the euro <EUR=> rose around 1 percent versus the dollar at $1.2231, after hitting the day's high of $1.2258, according to Reuters data. European equities <
> were up 0.8 percent at midday trade.But analysts said the recovery in the euro was unlikely to push it out of its downtrend, as the structural problems in the euro zone which have plagued the currency had not altered.
"We've seen a good session for equities. This looks to be a pro-risk move, driven by the higher-yielding currencies such as the Aussie. Fundamentally, nothing has changed for the euro," said Kenneth Broux, market economist at Lloyds Banking Group.
Traders said hedge funds had been seen cutting short positions on a break of $1.2150/60 in Asia and then through $1.2220 in Europe.
Technical analysts were looking for a close above the 21-day moving average at $1.2234 for the first time since mid-April. Additional resistance levels were highlighted at $1.2330 and $1.2445, the 2008 and 2009 lows.
The euro has lost 15 percent against the dollar this year but gained 1.6 percent last week as it pulled up from a trough of $1.1876, its lowest since around March 2006.
Some said risk appetite was also supported by comments from policymakers, including St. Louis Federal Reserve Bank President James Bullard who said a strong global economic recovery was underway [
].
EURO SHORTS BOOSTED
Commodity Futures Trading Commission data showed speculators boosted their bets against the euro in the week ended June 8, although net short positions were below record levels. [
]"The positioning is not extreme but there is room for a rebound in the euro from here. Our one-month forecast is for a move to $1.25 but after that we expect it to go down," said Derek Halpenny, European head of currency research at BTM-UFJ.
The Australian dollar gained around 1 percent versus the dollar <AUD=D4> to trade above $0.8600, its highest in a month.
The Aussie also gained more than a percent on the low-yielding yen, which was soft across the board, to 78.99 yen <AUDJPY=R>, touching its highest in nearly four weeks.
The euro rose 1.4 percent to trade above 112 yen for the first time in a week. The rise in the yen crosses allowed the dollar to make a brief show above 92 yen <JPY=>.
The dollar was down more than 1 percent versus a currency basket <.DXY> at 86.446. Analysts said the greenback could be undermined by U.S. President Barack Obama and his aides calling for more stimulus to support the economy. [
]Sterling was given a boost as the UK's newly created Office for Budget Responsibility said it expected government borrowing to fall slightly faster than originally thought. [
]The pound was up 1.2 percent versus the dollar <GBP=D4> at $1.4718 and outpaced the euro slightly to trade at 83.02 pence. (Additional reporting by Tamawa Desai; editing by Nigel Stephenson)