The euro rose against the dollar and came off 7-week lows against the yen on Tuesday, helped as solid results at Irish and Spanish bond auctions alleviated concerns about heavily indebted eurozone countries. Ireland's sale of 2014 and 2020 paper was viewed as a litmus test for investor appetite amid concerns about the cost of cleaning up its banking sector. Sales of 12- and 18-month Spanish treasury bills also met strong demand.
But the euro struggled to hold above $1.29 on uneasiness about the economic outlook, with a key German survey sparking concerns about whether Europe's largest economy can sustain a solid recovery. The German ZEW institute's measure of investor and analyst sentiment dropped well below forecasts, though this was partly offset by an unexpectedly sharp jump in the current conditions index. "Net-net the bond auctions and some positive aspects to the data have added to the positive tone on the euro today," said Lauren Rosborough, currency strategist at Westpac.
At 1115 GMT, the euro was up 0.3 percent at $1.2860, with key support at a one-month low around $1.2732 hit on trading platform EBS on Monday, traders said. The euro rose to the day's high of $1.2915 after the auction results as stop-losses were hit on the break of $1.2910.
"The much weaker-than-expected ZEW, which likely reflects renewed volatility in asset markets, will make it difficult for the euro to sustain gains," said Ian Stannard, senior currency strategist at BNP Paribas. The euro rose 0.2 percent against the yen to 109.73 yen after an early fall as low as 109.07 yen. The dollar stood at 85.34 yen after sliding to 85.11 yen in Asian trade, nearing a 15-year low of 84.72 yen hit last week. One-week implied volatility for dollar/yen fell to around 11.15 on Tuesday from above 12 percent last week.