* Greece a concern, but scope for higher ECB rates remains
* Core euro zone growth remains solid, according to data
* Canadian dollar jumps on inflation, Aussie in demand
(Recasts, adds comment, updates prices, changes byline)
By Steven C. Johnson
NEW YORK, April 19 (Reuters) - The euro rebounded against
the dollar on Tuesday as strong economic data reassured markets
about growth in major euro zone countries even as fears mount
that Greece may have to restructure its debt.
On Monday, worries about Greece sparked the biggest day of
euro selling in five months. But a Tuesday report showing April
business activity in Germany and France outpaced the 15 other
euro zone countries helped push it above $1.43, well off
Monday's two-week low of $1.4155. See []
A German government adviser said Tuesday a restructuring of
Greek debt was inevitable. Such an outcome would certainly be
negative for the euro, analysts said.
But the health of bigger euro zone countries suggest
interest rates in the bloc, which rose this month, could move
higher to counter price pressure.
That's not as clear in the United States, which has yet to
begin monetary tightening, while Japanese rates are expected to
remain low as the country rebuilds after a huge earthquake.
"There's a battle of the uglies going on," said Standard
Chartered analyst David Mann, and for now the euro's winning.
Mann said the euro looks set to retest 15-month highs above
$1.45 hit after the European Central Bank hiked rates.
The euro was last up 0.7 percent at $1.4338 <EUR=>. Traders
said a move above $1.4250 triggered automatic buy orders that
helped accelerate the rise.
The dollar fell 0.3 percent to 82.40 yen <JPY=> and slipped
0.9 percent to $0.9566 Canadian dollars <CAD=> after Canada's
inflation rate hit a 2-1/2-year high in March, jacking up
pressure on the Bank of Canada to raise interest rates.
THE FISCAL CHALLENGE
The debt-burdened United States also lags other major
economies when it comes to tightening fiscal policy, another
long-term dollar negative, said Dan Dorrow, head of research at
Faros Trading in Stamford, Connecticut.
Standard & Poor's this week threatened to cut the United
States' prized AAA credit rating unless the White House and
Congress can slash the huge budget deficit within two years.
Dorrow said that "draws attention to and may catalyze
future budgetary cuts that will restrain aggregate demand,
keeping the Fed very accommodative and the dollar weak."
Greece, Ireland and Portugal -- the three most troubled
euro zone nations facing harsh budget cuts -- account for just
6 percent of euro zone output, Dorrow said, suggesting more
"gentle fiscal headwinds" and allowing the ECB room to hike.
But some traders said the euro could encounter more selling
ahead of the Easter holidays. Net euro long positions rose to
their highest since late 2007 in the week to April 12, recent
data showed, leaving scope for a reversal. []
The blemishes on both the U.S. dollar and the euro should
continue to boost the comomdity-sensitive Australian dollar,
Mann said.
The Aussie was trading at $1.0524 <AUD=D4>, near 29-year
highs. Australia's high benchamrk interest rate and its role as
a raw materials supplier to a booming Chinese economy have
increased its appeal.
"The Aussie around $1.05 is a pretty major psychological
level, but given Australia's impressive terms of trade, its
strong growth numbers and the resilience of China, there's a
case to be made that we haven't seen the high yet," he said.
(Additional reporting by Wanfeng Zhou; Editing by Chizu
Nomiyama)
