* Euro up 0.5 pct, hopes for Irish aid package support
* China ups bank reserve requirements
* Bernanke defends QE, dismisses charges of debasing dollar
(Adds quote, updates prices)
By Tamawa Desai
LONDON, Nov 19 (Reuters) - The euro edged up on Friday,
recouping earlier losses on expectations that Ireland was near a
deal to get tens of billions of euros from its European partners
and the IMF for its shattered banks.
The euro hit the day's high versus the dollar after China
tightened monetary policy on Friday by raising banks' reserve
requirements [], as a fall in many major currencies
on the initial news was countered by a wave of buying.
Still, some higher-risk currencies including the Australian
dollar <AUD=D4> traded lower on the day, as China's tightening
moves were seen as detrimental to the Aussie, which tends to
rise on signs that Beijing's economy is growing.
Investors awaited an announcement on debt assistance to
Ireland. Dublin said discussions would run into next week, and
Finance Minister Brian Lenihan told parliament it was not yet at
the point of requesting a loan. []
Analysts said a bailout package would boost the euro.
"There is a degree of calm on anticipation of a near-term
resolution for the Irish banks, which has fed renewed
risk-taking and a relief rally for the euro, which could
potentially rise to $1.40," said Lee Hardman, currency economist
at Bank of Tokyo-Mitsubishi UFJ.
By 1205 GMT, the euro <EUR=> rose 0.5 percent on the day to
a session high around $1.3730. It has recovered from a slide to
a seven-week low of $1.3446 earlier in the week and is poised to
end the week slightly higher against the dollar.
Support was seen at the 55-day moving average at $1.3607 on
Friday, traders said. Offers were seen around $1.3700 and above.
Losses versus the euro helped to push the dollar index
<.DXY> down 0.5 percent on the day.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Take a Look on Ireland crisis: []
Graphic on euro zone's struggle with debt:
http://r.reuters.com/hyb65p
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Against the yen, the euro rose 0.3 percent to 114.25 yen
<EURJPY=R>, up from the week's low of 112.27 yen on Tuesday.
BERNANKE DEFENDS QE
Analysts said money market rates have remained higher since
Greece's debt problems came to a head earlier this year,
suggesting investors have priced in the possibility of more
sovereign debt crises and minimising the possibility of another
hefty sell-off in the euro.
"We're not seeing the vicious, speculative selling of the
euro as we did during Greece's problems," said Stephen Gallo,
head of markets analysis at Schneider FX.
"You're also not seeing real money moving out of their
longer-term euro long positions," he said, adding that selling
in the euro under $1.3500 had offered a good chance for
long-term investors to pick up euro assets, albeit cautiously.
Still, some analysts said the euro could be vulnerable if an
aid package for Ireland did not materialise quickly.
ECB President Jean-Claude Trichet on Friday said he shared
the same view on the dollar as U.S. Federal Reserve Chairman Ben
Bernanke, who hit back at critics of the U.S. central bank's
latest bond-buying programme. []
In prepared remarks for delivery at a conference in
Frankfurt, Bernanke also issued a thinly veiled attack on
China's policy of keeping its currency weak. []
His remarks helped push down U.S. Treasury yields, which in
turn discouraged players from buying dollars, traders said.
The dollar eased 0.2 percent to 83.30 yen <JPY=>, coming off
a six-week high of 83.79 yen marked on Thursday.
(Additional reporting by Naomi Tajitsu; Editing by Giles
Elgood)
