* Dollar gains as stocks rally
* Worries about euro zone debt continue to haunt euro
* Friday's U.S. jobs, Bernanke remain key
* Estonia now part of euro zone
(Recasts, adds quotes, U.S. data, updates prices)
By Julie Haviv
NEW YORK, Jan 3 (Reuters) - The dollar gained slightly
against the euro on Monday as global stocks rallied, and was
expected to outperform the single European currency given
concerns about some euro zone nations' ability to sell debt.
Thinned trading due to holidays in Tokyo and London added
to volatility in the euro, which now trades as a 17-country
unit after Estonia gained full membership on Jan 1.
"You really cannot read too much into today's market
action," said Mark McCormick, currency strategist at Brown
Brothers Harriman in New York. "Having said that, there are
plenty of factors that should weigh on the euro over the
near-term while the dollar should continue to benefit from
strong economic data."
Manufacturing in the United States and Europe accelerated
in December, while growth in China and India slowed to a more
sustainable level, helping to fuel a move by investors into
riskier assets. []
Wall Street stocks launched the new trading year with gains
of 1 percent or more, extending the late-2010 rally on
optimistic signs about a global economic recovery.
[]. Rising U.S. Treasury bond yields also
benefited the U.S. dollar. []
Weighing on the euro, meanwhile, were worries about the
ability of certain euro zone countries to sell an abundance of
debt. Portugal is expected to refinance 11 billion euros worth
of debt and Spain 32 billion euros worth of debt in the first
quarter, according to BBH's McCormick.
In late afternoon New York trading, the euro fell to
$1.3358 <EUR=>, down 0.14 percent on the day.
The euro, however, fared well against other currencies,
rising 0.65 percent against sterling to 86.27 pence <EURGBP=>
and gaining 0.4 percent versus the yen to 109.06 yen
<EURJPY=>.
Greg Anderson, senior currency strategist at CitiFX in New
York, said markets are "expecting further U.S. economic
outperformance in the first quarter" which is dollar-positive.
He also expects further losses in the euro starting this
week "until the market is satisfied with the outcomes for
Portugal and Spain."
Anderson added that the currency market will more or less
have the same theme as last year, "with the euro being sold off
because of the euro zone debt crisis."
The euro ended 2010 around 6.5 percent lower against the
dollar, its biggest annual drop since 2005, weighed down by a
debt crisis that hit Greece and Ireland.
Investors are further worried about Spain and Italy, which
later in the spring will be hunting for buyers of 400-billion
euros in debt as maturing bonds fall due.
The single euro zone currency, however, climbed last week,
hitting roughly three-week highs versus the dollar, as bears
gave up their positions, frustrated by the currency's firm
support at its 200-day moving average just below $1.31.
Some traders said the euro gained some ground as European
equities rose <> after earlier euro selling by macro
funds. "Without an upside surprise in the (U.S.) job data this
week, dollar/yen is likely to come under renewed pressure,"
analysts at BNP Paribas said in a note.
U.S. nonfarm payrolls due out on Friday are seen rising
140,000 in December, a Reuters poll showed. U.S. Federal
Reserve Chairman Ben Bernanke's congressional testimony
scheduled for Friday will also be closely watched.
The dollar rose 0.6 percent against the yen to 81.64 yen
<JPY=>.
The dollar was down 0.06 percent against the Swiss franc to
0.9329 francs <CHF=>, after dropping to an all-time low of
0.9301 on Friday. The euro was flat against the Swiss franc at
1.2466 francs <EURCHF=>, still some distance away from its
record low at 1.2398 francs hit last week.
(Additional reporting by Gertrude Chavez-Dreyfuss, Editing
by Chizu Nomiyama)
