* Euro rises 0.9 pct at $1.2288 <EUR=>
* Banks borrow 131.9 bln euros from ECB, less than expected
* Swiss franc falls as Hungary plans new IMF deal
(Updates prices, adds comment)
By Dominic Lau and Tamawa Desai
LONDON, June 30 (Reuters) - The euro gained broadly on
Wednesday after banks borrowed less-than-expected funds from the
European Central Bank, easing concerns over European banks'
funding issues.
The ECB lent banks 131.9 billion euros ($161.4 billion) in
three-month funds, as banks face the repayment of close to half
a trillion euros in 12-month funds on Thursday. []
The tender results were keenly awaited to gauge how reliant
European banks are on ECB emergency funding. Spanish, Portuguese
and Greek banks have been the biggest users of the facilities.
"The market, with respect to this particular tender, has
sort of got its 'knickers in a twist' over nothing. Any kind of
sense that the ECB is in some way going to leave the market
short of liquidity is obviously very far wide of the mark," said
Steve Barrow, currency strategist at Standard Bank.
"It just helps stabilise the euro ... For the moment, it's
not the slippery slope again. We might see some more stability,
may be even a little bit higher, $1.25 or above," he said.
The euro extended gains to hit the day's high of $1.2304
<EUR=>, according to Reuters data, and rebounding from a
two-week low near $1.2150 <EUR=> struck the previous day.
The single currency also rose more than 1 percent against
sterling <EURGBP=D4>. Flows related to the end of the month,
quarter and half year affected price movements in thin trade,
traders said.
Against the yen, the euro was up 1 percent at 108.99 yen
<EURJPY=R>, after hitting an 8-1/2 year low of 107.30 the
previous day.
However, the euro is still down 14 percent against the U.S.
currency, down 18 percent against the yen and down 10 percent
versus the Swiss franc <EURCHF=> this year.
The dollar slipped 0.4 percent against a basket of major
currencies <.DXY>. The index has still advanced more than 10
percent so far this year.
UBS said it expected to see a "significant amount" of dollar
buying at the fix later in the day for the end of the quarter
and the first half of 2010, after looking at recent equities
performance throughout G10 currencies.
RISK STAYS HIGH
Market players were cautious as there were more events lined
up that could pose a risk for the single currency, including the
German presidential election on Wednesday. []
"We don't expect any surprises, but if it goes into a second
or third round, it would raise questions about German Chancellor
Angela Merkel's political support and weigh on the euro," said
Antje Praefcke, currency strategist at Commerzbank in Frankfurt.
They were also wary ahead of a meeting later on Wednesday
with Germany's central bank and financial market watchdog and
the country's largest banks to discuss stress test results.
Illustrating the nervousness in the market, the VDAX-NEW
volatility index <.V1XI>, Europe's main barometer of investor
anxiety, shed 2.4 percent on Wednesday after rising 15 percent
in the previous session to a three-week high.
The Swiss franc fell against the euro after Hungary said it
was eyeing a new precautionary standby agreement with the
International Monetary Fund for 2011.[]
The move alleviated some concerns about Hungary's large
stock of franc-denominated debt.
The euro was last up 0.7 percent at 1.3275 francs <EURCHF=R>
after hitting a lifetime low of 1.3165 on Tuesday. It is down
more than 10 percent on the franc this year.
Traders will also keep an eye on U.S. ADP employment report
ahead of nonfarm payrolls data on Friday. A higher-than-expected
reading may give the dollar a lift after a slew of poor economic
data recently.
(Editing by Ron Askew)
