TOKYO: The euro advanced to a one-week high against the dollar on Thursday as strong commodity prices and a report that China is interested in buying "bailout bonds" for Portugal spurred active stop-loss buying of the single currency. The market saw sizable stop-loss euro purchases at $1.4120 and $1.4150, encouraged by a Financial Times article quoting the chief executive of the European Financial Stability Facility as saying China was "clearly interested" in buying bonds for the Portugal bailout to be issued in mid-June. A convincing recovery in commodity prices, in which the key U.S. crude oil futures extended gains in Asia to above $101.50, also spurred active broad-based corrective buying of the euro in Asian trade. The euro could revisit $1.42, but lingering uncertainty over debt problems in Greece and other euro zone countries was expected to limit strong follow-through moves. "We've seen the euro test downwards recently, but I feel there are plenty of euro-buying needs as European investors would want to repatriate funds ahead of more potential stress tests in Europe," said Hideki Amikura, a forex manager at Nomura Trust and Banking. "In addition, such demand related to bailout bond buying and lingering prospects of a possible interest rate hike by the European Central Bank could prevent the euro from falling sharply," Amikura said. The euro was up 0.5 percent at $1.4164 after reaching a session peak of $1.4173, its the highest since May 20. The euro gained support the previous day after Finland approved an EU/IMF bailout for Portugal, while demand from hedge funds also prompted a squeeze in euro short positions. The euro was refreshed by finding support at a series of technical points below $1.4000, including the 100-day moving average, now at $1.3997, and another support seen near $1.3968, a two-month low struck earlier this week. Below that point, $1.3770 was seen as important as it is a 38.2 percent Fibonacci retracement of the euro's rise from June 2010 to May 2011. Dealers said strong commodity prices also encouraged investors to buy the euro. "We really don't know how debt problems in Greece and other euro-zone areas will be resolved, which is negative for the euro, but for now strong oil prices are helping the single currency," said Junya Tanase, a forex strategist at J.P. Morgan Chase Bank. "Higher crude oil prices above $100 could be negative for the dollar, while the euro could benefit," Tanase said. U.S. crude for July was up 0.3 percent at $101.64 a barrel. U.S. crude has bounced $7 since early May, when it hit its lowest since mid-February. The 19-commodity Reuters-Jefferies CRB index rose 1.6 percent on Wednesday, extending the previous day's rise of 0.7 percent. Strong commodities prices have also bolstered the Australian dollar by 0.7 percent to $1.0595 . PICKING UP SPEED The Aussie was also helped by data showing capital spending in Australia picked up speed in the March quarter, rising 3.4 percent against expectations for a 2.5 percent rise. Still, the Aussie was capped as it lost ground against the New Zealand dollar on a report that China's sovereign wealth fund would buy New Zealand assets.

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