LONDON, Aug 17, 2010 (AFP) - The European single currency bounced above 1.29 dollars on Tuesday following news of a successful Irish bond auction but pulled back after a downbeat survey on German investor confidence.
In late morning trading here, the euro rallied to 1.2916 dollars. It later pulled back to 1.2886 dollars, still up from 1.2822 dollars late in New York on Monday.
Against the Japanese currency, the dollar rose to 85.29 yen from 85.34 yen on Monday.
The Irish government, struggling to manage its finances in the fallout from the Greek debt crisis, raised 1.5 billion euros (1.93 billion dollars) on Tuesday, the country's debt management agency said.
The sale was closely watched because heavily indebted Ireland needs to raise fresh funds to roll-over maturing debt while it restores public finances ravaged by the global crisis amid concerns weaker eurozone countries may fail to pay their way.
"Euro/dollar briefly rallied through 1.29 in the immediate wake of the Irish bond auction but has subsequently slipped," said Adam Cole, global head of foreign exchange strategy at RBC Capital Markets in London.
"A weaker than expected German ZEW survey ... helped take some of the shine off (the) euro's performance."
A sharp drop in the closely-watched ZEW economic indicator stoked fears Tuesday that the strong recovery in Europe's powerhouse will peter out as demand weakens for its all-important exports.
The ZEW institute's sentiment indicator, based on a survey of 284 analysts and institutional investors, fell 7.2 points to 14 points in August, its fourth consecutive monthly fall and a much sharper drop than feared.
"The German ZEW index declined by more than expected in August ... most likely on growing concerns over US and global growth, despite the renewed signs of strength in the German economy," said analyst Slavena Nazarova at Credit Agricole CIB.
She added: "The ZEW can be expected to ease further in the near term but market reaction should remain limited as it is clear that eurozone vulnerabilities lie outside Germany."
Last week, data showed that German gross domestic product (GDP) surged in the second quarter at its fastest rate since reunification 20 years ago, with output soaring 2.2 percent compared to the previous three-month period.
In trading in London, the euro changed hands at 1.2886 dollars against 1.2822 dollars on Monday, at 109.93 yen (109.43), 0.8222 pounds (0.8187) and 1.3426 Swiss francs (1.3326).
The dollar stood at 85.29 yen (85.34) and 1.0417 Swiss francs (1.0392).
The pound was at 1.5673 dollars (1.5658).
On the London Bullion Market, the price of gold climbed to 1,226.32 dollars an ounce from 1,223.50 dollars an ounce on Monday.
