* Euro pares losses on talk of Irish bailout package
* Trade volatile as Irish government denies talk of rescue
* China rate hike talk hurts commodities, Aussie
(Adds quote, updates prices)
By Anirban Nag
LONDON, Nov 12 (Reuters) - The euro bounced from six-week
lows against the dollar on Friday as EU leaders sought to
reassure nervous bondholders and on speculation, quickly denied,
a rescue package for Ireland was being hammered out.
The euro <EUR=> rose to a session high of $1.3745,
rebounding smartly from its low of $1.3573 on EBS. It moved up
on steady buying by macro funds as the cost of insuring Irish,
Spanish and Portuguese debt against default fell after European
Union leaders said holders of outstanding bonds would not be
forced to take losses.
"These comments from the EU leaders have provided some
support to the euro at around the $1.36 level," said Chris
Turner, head of FX strategy at ING.
Talk of a report by a U.S. think saying the EU planned to
hammer out a rescue package for Ireland as early as next week
also helped the euro.
The Irish Finance ministry said market talk of a bailout
package with EU was untrue, pulling the euro off its highs to
trade at $1.3695.
"Ireland doesn't need to come to the market until mid 2011.
Lots of things can happen in six months and I don't see why they
would need a bailout now," said Adrian Schmidt, currency
strategist at Lloyds Banking Group.
Two thirds of economists and bond strategists polled by
Reuters on Thursday said Ireland would seek international rescue
funds before the end of next year. []
Earlier a statement from France, Germany, Italy, Spain and
Britain, issued at the Group of 20 summit in Seoul, said
bondholders would not have to take a haircut under current debt
rules, allowing Irish bond yields to fall. []
Still, the euro has shed over 2 percent this week as long
positions built before the Fed's bond buying decision last week
have been unwound heading into the year-end book-closing season.
Analysts said the communique from G20 leaders meeting in
Seoul was mildly positive as it agreed to tackle tensions that
have threatened "currency wars" and trade protectionism.
[].
The G20 seemed to give the green signal to emerging
countries with flexible currency regimes to impose capital
controls.
"That seems to have hurt risk appetite a bit and investors
are booking profits in riskier assets," ING's Turner said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
G20 Take a Look []
Multimedia PDFs>>
G20 battle lines: http://r.reuters.com/jux34q
Basel III: http://r.reuters.com/zys68p
The Fed's gamble: http://r.reuters.com/cyh73q
Graphics>>
Ireland's bailout challenge: http://r.reuters.com/wuv48p
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CHINA RATE HIKE TALK HITS COMMODITIES AND STOCKS
The Australian dollar <AUD=D4>, a favourite amongst
investors choosing to buy into growth, sold off sharply. It shed
more than 1 percent to as low as $0.9825, its lowest since Nov.
1. It was down 0.6 percent in late morning trade.
Media reports suggested China was planning to limit
foreigners investing in its already speculative real estate
sector while South Korea was planning capital controls.
China's key stock index posted its biggest percentage loss
in 14 months, ending down 5.2 percent on Friday on talk of more
monetary tightening.
Most cross-yen pairs, such as Aussie/yen, kiwi/yen, and the
Canadian dollar/yen were lower on the day.
The euro fell to a two-month low against the yen <EURJPY=R>,
hitting 111.04 on EBS, and was last down 0.2 percent at 112.57.
"Risk is off the table," said Jane Foley, senior currency
strategist at Rabobank. "These sovereign debt problems are a
trigger to book profits in commodities and emerging markets
assets."
The dollar fell against the yen <JPY=>, moving back towards
its 15-year lows. It was down 0.5 percent at 82.16 yen, with
Japanese exporters selling into the dollar's recent bounce.
(Additional reporting by Neal Armstrong)
