* Euro rallies as European governments agree to bank rescue
* Sterling up as UK details bank bailout plan
* Global stocks rally, but anxiety remains
(Adds detail, updates prices, adds comment)
By Steven C. Johnson
NEW YORK, Oct 13 (Reuters) - The euro rose on Monday after
European government plans to pump billions into troubled banks
and guarantee bank borrowing helped the currency sprint away
from a 1-1/2-year low against the dollar.
Sterling also gained after the UK government said it would
pour $64 billion into three of its biggest banks as part of a
plan to restore confidence in what has become the worst global
financial crisis in 80 years. For details, see []
Germany approved a 500 billion euro rescue plan on Monday,
and the French government was set to create a $55 billion fund
to take stakes in its banks, media reports said. []
European shares soared <> while U.S. stocks rebounded
smartly from Friday's precipitous decline. Unlimited dollar
auctions from the Federal Reserve and three other central banks
also weakened demand for dollars and prompted investors to take
on more risk after running for the hills on Friday.
The bank bailout "is the first positive step in the right
direction and demonstrates the ability of officials to act in
concert, which should provide the euro with a boost of
confidence for the time being," said Boris Schlossberg,
director of research at GFT Forex in New York.
Midday in New York, the euro was up 1 percent at $1.3549
<EUR=>, more than a cent off its session peak but well above
Friday's low of $1.3257, its weakest level since March, 2007.
Against the yen, the euro climbed 1.3 percent to 136.75
<EURJPY=>. The dollar rose 0.3 percent to 100.91 yen <JPY=>.
The low-yield yen surged last week as anxious investors
unwound trades financed with the Japanese currency, but renewed
risk appetite made it one of the poorest performers on Monday.
Sterling rose 2.1 percent to $1.7396 <GBP=> after slumping
to a five-year low near $1.68 on Friday.
Tokyo bourses and New York bond markets were closed for
national holidays, sapping trading volume.
RECESSION WORRIES PERSIST
The United States, which adopted a $700 billion rescue
earlier this month, said it too would take stakes in banks, its
first such move since the Great Depression, and Australia said
it would guarantee deposits in its banks. [].
Australia's move helped stem aggressive selling of the
Australian dollar, which rose 5.5 percent to $0.6780 <AUD=>.
It would be a mistake, however, to assume that anxiety had
been wiped out by the collective rescue plans, investors said.
Last week, Wall Street had its worst week ever while European
shares fell more than 20 percent, and the dollar soared as
investors seeking safety snapped up the U.S. currency.
"I think we are not out of the woods yet when it comes to
safe haven flows," said Divyang Shah, chief market strateigst
at Commonwealth Bank of Australia in London.
"The credit crunch for households and non-financials as
well as a U.S. consumer recession are still issues that we have
to overcome," he added. "Demand for dollars will continue."
Stephen Jen, global head of currency research at Morgan
Stanley, added the world still risks falling into recession.
"Investors should sell into any relief rally we might see
in the short term," he wrote in a note to clients. "This means
the dollar should resume its rally against the euro and
emerging market currencies in a matter of days, I suspect."
(Additional reporting by Veronica Brown in London; Editing
by Chizu Nomiyama)
