* Euro gains vs dlr; trade still very thin
* Stocks gain; Aussie dlr at 12-day high vs U.S. dollar
* Dlr stays supported vs yen on better U.S. economic outlook
(Updates prices; changes byline, dateline; previous TOKYO)
By Jessica Mortimer
LONDON, Dec 29 (Reuters) - The euro and higher yielding
currencies such as the Australian dollar gained against the U.S.
dollar on Tuesday, lifted by improved appetite for risk as
equities gained ground.
Volumes were very thin, however, and analysts were wary of
drawing too many conclusions from current intraday movements,
with the euro still trading within its recent range against the
dollar, albeit at the top end.
Against the yen, the dollar stayed supported, hovering close
to a two-month high on the view that the U.S. economy is
recovering well, which has lifted U.S. Treasury yields.
Later in the session, investors will watch for U.S. consumer
confidence for December at 1500 GMT and the Standard &
Poor's/Case-Shiller home price index for October at 1400 GMT for
further clues on how well the U.S. economy is faring. <ECONUS>
"Anything that points in the direction of the Federal
Reserve raising interest rates earlier than previously thought
will support the dollar -- there has been no indication of this
from the Fed but U.S. data recently has been coming in on the
strong side," said Johan Javeus, SEB currency strategist in
Stockholm.
"Trade is very, very quiet, but for now risk appetite is
back on, stock markets are higher and the commodity rally has
regained some strength which is positive for currencies such as
the Australian dollar," he said.
At 0934 GMT, the euro was up 0.3 percent at $1.4421 <EUR=>
as it continued to rebound from a 3-1/2-month low of $1.4218 hit
a week ago.
The higher-yielding Australian dollar rose 0.8 percent to a
12-day high of $0.8950, edging back towards the $0.90 level.
Improved investor appetite for taking on risk was reflected
in a 0.3 percent rise in European shares <> and as oil
prices <CLc1> hovered not far below $80 per barrel.
The dollar index, a gauge for the greenback's performance
against other six major currencies, fell 0.3 percent to 77.427
<.DXY>.
The dollar index was still in sight of a 3-1/2-month high of
78.449 hit last week, although some traders said the U.S.
currency may struggle to rise further after speculators have
finished covering short dollar positions.
Data on Monday showed speculators were long in the U.S.
currency for the first time since May, ending 32 straight weeks
of short dollar positions. []
Against the yen, the dollar was steady at 91.56 yen <JPY=>,
within reach of a two-month high of 91.88 set last week.
Traders said upward pressure on long-term Treasury yields is
providing support to the dollar against the yen after U.S.
government bonds traded lower the previous day and pushed the
benchmark 10-year note yield to its highest in nearly five
months. []
"Given the fact that upward pressure remains on Treasury
yields, dollar/yen still has the potential to reach as high as
mid-92 within the year," said Toshihiko Sakai, a manager for
forex trading at Mitsubishi UFJ Trust Bank.
The dollar showed little reaction to the Federal Reserve's
proposal on Monday to create a new mechanism, a "term deposit
facility," to help the central bank's policy-makers withdraw
money from the banking system when they decide to tighten
monetary policy. []
(Additional reporting by Satomi Noguchi in Toyko; editing by
Chris Pizzey)
