RTRS: Euro edges up on debt hopes, yield advantage
* Market gives EU leaders time to resolve debt problems
* Euro helped by yield advantage, rising lending rates
* Stellar China GDP stokes rate-tightening speculation
(Releads, adds quotes, detail)
By Neal Armstrong
LONDON, Jan 20 (Reuters) - The euro edged up against the dollar on Thursday on persistent demand from sovereign accounts, while investors gave euro zone officials time to make progress on finding a sustainable solution to its debt crisis.
The single currency recovered from an early slide, shaking off European share price falls, with traders saying Mideast and Asian central banks were buying around the day's low, pushing it back towards a two-month high hit the previous day.
Analysts said investors were optimistic the European Union's rescue fund (EFSF) will ultimately offer a comprehensive solution to help euro zone countries finance mounting debts.
"There's improved sentiment for the euro in that the market seems to want to give the EU time to come up with a more comprehensive deal to sort out the peripheral debt issue," said Gavin Friend, currency strategist at nabCapital.
The Financial Times Deutschland on Thursday said euro area finance ministers had discussed a plan to ease pressure on Greece by allowing it buy back its own debt using credits from the EFSF. [ID:nLDE70J0CB]
The euro EUR= rose 0.3 percent to $1.3520, hitting the day's high after Morgan Stanley Q4 earnings per share came in above expectations [ID:nASA01ELW]. It hovered near a two-month high hit on Wednesday of $1.3539.
"The markets remain fairly calm and are giving the euro zone authorities the benefit of the doubt for now, buying the euro on the back of its favourable yield differential relative to the dollar," said Kathleen Brooks, research director at FOREX.com.
Key euro-priced bank-to-bank lending rates rose on Thursday, as markets continued to digest last week's inflation warning from the European Central Bank, lending support to the euro. [ID:nLDE70J0UO]
Technical analysts said the single currency would be supported around $1.3435, its 100-day moving average, while upward resistance was seen at $1.3570, the 50 percent retracement of the euro's November-to-January slide.
European stock markets took a cue from selling in Asian equities, after data showing stellar economic growth in China in 2010 fuelled speculation that Beijing may come under more pressure to tighten monetary policy. [ID:nTOE70J02S]
