* China allows yuan to rise 0.4 pct to post-revaluation high
* Euro, Aussie hit 1-mth highs as dollar falls broadly
* Euro recovery fragile, investors look to sell rallies
(Adds quote, detail)
By Naomi Tajitsu
LONDON, June 21 (Reuters) - The euro and Australian dollar
hit their highest against the U.S. dollar in about a month on
Monday after China allowed the yuan to rise to a
post-revaluation high, boosting demand for riskier currencies.
The single European currency extended its recovery versus
its U.S. counterpart, pulling further away from its weakest in
more than four years hit earlier in the month, but confidence in
the euro's recovery remained fragile.
Spot yuan <CNY=CFXS> rose to its highest since its 2005
revaluation on the view that a freer currency will be positive
for the global economic recovery, and spurred a rise in
commodity and oil prices and boosted riskier assets.
It also added to hopes of easing tensions in the Group of 20
leading economies ahead of a meeting later this week.
[]
"The market's reaction has been pragmatic, both in terms of
scale and direction," said Daragh Maher, senior currency
strategist at Credit Agricole CIB, noting that the euro's gains
had been subdued compared with the Australian dollar's rally.
"The bullish risk view supports the argument to sell the
dollar, but there are better ways to play it rather than buying
the euro. It makes more sense for Asian currencies and the
Aussie and kiwi to rise."
He added that China would be cautious about the pace of a
yuan appreciation, and in a note, Credit Agricole said that
given the euro's 13 percent fall versus the yuan this year,
Beijing may be wary of accelerating the currency's rise for fear
it could limit Chinese trade with Europe.
The dollar slipped versus a basket of currencies <.DXY> to a
one-month low of 85.091 as the euro <EUR=> rose to to $1.2490 on
trading platform EBS, its highest level since May 24.
By 1106 GMT, the euro had pared gains to $1.2390. Traders
said option barriers at $1.2500 were preventing further gains,
reportedly being protected by a major Asian sovereign account.
HIGH-YIELDERS
The euro posted its best weekly gain versus the dollar since
May 2009 as investors trimmed bets against the single currency,
buts its recovery remains fragile given concerns about the
impact of debt problems in some euro zone countries on the
global economy.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Latest CFTC positioning data showed a sharp reduction in euro
shorts: http://r.reuters.com/kus26k
Emerging stocks, bonds surge []
Main yuan coverage []
Winners and losers from a firmer yuan []
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"A sell-the-rally mentality persists for the euro in the
short-term. Its rise has been a function of position
adjustment." said Paul Mackel, director of FX strategy at HSBC.
Mackel suggested brighter signals were needed in euro zone
bond markets for the currency's recovery to be sustainable.
The higher-yielding Australian dollar <AUD=D4> gained 1.4
percent to around $0.8840 after hitting $0.8860 as European
equities <> rallied 1.3 percent.
Markets have been worried China could over-tighten and slow
its economy too far, which had raised concerns about Beijing's
demand for natural resources, which would impact
commodity-linked currencies including the Australian dollar.
But the strong yuan helped to boost the Australian dollar
across the board, lifting it 2.5 percent against the yen to hit
a one-month high of 80.80 yen.
The low-yielding yen suffered broadly, pushing the euro
<EURJPY=R> 0.9 percent higher to 113.30 yen, while the dollar
<JPY=> rose 0.9 percent to 91.45 yen.
(Additional reporting by Neal Armstrong, editing by Toby
Chopra)
