* Euro rises on easing worries over Irish debt crisis
* U.S. factory, jobless data show economic strength
* Dollar hits six-week highs vs yen
(Adds quote, updates prices, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 18 (Reuters) - The euro firmed on Thursday,
on track for its largest one-day gain against the U.S. dollar
in two weeks, as investors became more optimistic about a
rescue plan for debt-stricken Ireland.
Gains in the euro, however, may prove short-lived given
concerns troubles in that country may spread to other
peripheral economies in the euro zone such as Portugal and
Spain.
Problems in Ireland overshadowed generally upbeat U.S.
economic reports that propelled the dollar to a six-week high
against the yen. Data on Thursday showed a decline in jobless
claims to a two-year low while factory activity in the U.S.
Mid-Atlantic region grew more than expected in November. For
details, see []
"At this point, Europe is going to address the Irish
problem," said James Dailey, chief investment officer and
senior portfolio manager at TEAM Asset Strategy Fund, a mutual
fund based in Harrisburg, Pennsylvania.
"I think what you saw over the last two weeks with Angela
Merkel (German Chancellor) ... talking about debt holders
having to share in the losses and backtracking from that is
indicative ... that (Europe) is likely to monetize this
problem," said Dailey, who oversees assets of about $45
million.
The euro earlier climbed about 1.0 percent versus the
dollar and yen as the cost of insuring Irish debt against
default fell after Ireland's central bank chief said he
expected Dublin to receive tens of billions of euros in loans
from European partners and the IMF. []
Analysts cautioned, however, that lingering worries about
other debt-laden European countries will likely continue to
weigh on the euro, which has lost about 3 percent this month as
funds liquidated long positions.
FURTHER EURO DOWNSIDE SEEN
TEAM's Dailey said he expects further downside in the euro,
falling anywhere between $1.30-$1.32. "We'll probably see a
spike because the decline has been pretty much linear. When
that happens, we can go back up to the $1.36-$1.37 level and
that would probably be an opportune time to sell the euro
again."
Year-end flows could further support the dollar versus the
euro. Recent U.S. data, including Thursday's regional
manufacturing and leading indicators reports, has showed an
improving economic picture, which could spur investors to close
out short dollar positions ahead of the end of the year.
The euro <EUR=> hit a session high of $1.3668 on trading
platform EBS, moving away from a seven-week low of $1.3446 set
on Tuesday. It was last up 0.8 percent at $1.3622, the euro's
best daily performance since early November.
Traders said stop-losses were triggered at $1.3630.
Resistance is at $1.3750, followed by $1.3765, the 38.2 percent
retracement of this month's fall.
It also rose 1.1 percent against the yen <EURJPY=R>.
Still some analysts said even if a quick resolution is
reached over Ireland, market participants would fret about
other peripheral euro zone economies and their debt levels,
with Portugal thought to be in the market's sights.
"The markets are not wholly convinced that contagion issues
will be contained. That's why we're not seeing a really
aggressive rally in the euro. Otherwise, the euro would be up
at around $1.38 or $1.39," said Dean Popplewell, chief
strategist of FX brokerage OANDA in Toronto. "We are certainly
seeing interest to actually sell euros on rallies."
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How Ireland might tap funds: []
Euro zone debt struggles: http://r.reuters.com/hyb65p
Multimedia coverage: http://r.reuters.com/hus75h
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Against the yen <JPY=EBS>, the dollar rose 0.4 percent to
83.57 yen, extending gains after the release of the U.S. data.
It earlier hit a a high of 83.79, the dollar's strongest level
since Oct. 5, according to EBS.
Optimism about Ireland also bolstered risk appetite toward
equities and commodities and drove higher-yielding currencies
up. The Australian <AUD=D4> and New Zealand <NZD=D4> dollars
rose more than 1 percent on Thursday.
(Additional reporting by Wanfeng Zhou; Editing by Andrew Hay)
