May 7 (Bloomberg) -- The euro is confounding bears predicting a meltdown as it gets an unexpected boost from the economic and political turmoil gripping Europe. The 17-nation currency has risen about 1 percent against nine peers from this year's low on Jan. 16, while the dollar slid 2.3 percent, data compiled by Bloomberg show. Futures traders are trimming bets that it will fall against the dollar, while options show investors are less bearish. Europe's common currency is trading more than 8 percent above the average against the dollar since its 1999 creation even after Spain, Greece, Italy and Portugal slid into recession and Nicolas Sarkozy became the first French president in 30 years to fail to win re-election amid a region-wide backlash against austerity. The turbulence is infecting economies including Australia and Sweden, regarded as havens, prompting policy makers in those countries to cut interest rates, weakening their currencies. "The euro's pretty much hanging in there," Eric Busay, a currency and international fixed-income money manager in Sacramento at California Public Employees' Retirement System, the largest U.S. public pension, with $235 billion in assets, said in an telephone interview on April 30. "When central banks are cutting rates, as they are in several countries, there is clearly not a great reason to be bullish on those currencies." Bears Defied The shared currency's resilience since the debt crisis started in Greece in October 2009 has defied investors including billionaire George Soros, who said in January that German-driven austerity plans in Europe risk creating "tensions that could destroy the European Union." Bets made at Intrade.com show a 39.5 percent chance of a country exiting the European Union by Dec. 31, 2013, down from 65 percent in November. Francois Hollande, 57, defeated Sarkozy, getting about 52 percent against about 48 percent for the incumbent, according to estimates by four pollsters. Hollande has advocated a more aggressive European Central Bank role in spurring growth, a measure opposed by Germany. Greek voters flocked to anti-bailout parties, throwing doubt on whether the two main parties can form a government strong enough to implement spending cuts to ensure the flow of bailout funds. According to projections based on partially counted ballots on state-run NET TV, Pasok and New Democracy would fall one short of the 151 seats needed to win a majority. 'Currencies Can Fall' The euro declined 1.3 percent last week to $1.3084 and was 1.8 percent lower at 104.49 yen. Europe's common currency has averaged about $1.20 since it was introduced in January 1999, and over the last two years has ranged from $1.1877 in June 2010 to $1.4940 in May 2011. The shared European currency weakened 0.3 percent to $1.3047 at 11:04 a.m. New York time, after dropping to $1.2955, the lowest level in more than three months. Strategists say the worst may be over. The median of 48 estimates in a Bloomberg survey is for the euro to trade at $1.30 by year-end. It will buy 106 yen, a separate survey showed. "In a weakening global environment, countries that can cut rates will do so and their currencies can fall," Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in a telephone interview on May 1. "Europe is an economy with a currency that isn't expensive, with not much scope or appetite for cuts." Rate Decision Traders drove the euro higher on May 3, before it ended little changed, as the ECB kept rates on hold and President Mario Draghi said policy makers didn't discuss a cut. It depreciated 0.1 percent the past three months based on Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies, while Australia's dollar dropped 4.6 percent, the yen 2.4 percent, Sweden's krona fell 1.2 percent and New Zealand's dollar 3.6 percent.

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