Euro pares gains in London

The euro pared gains against the dollar on Thursday in choppy year-end conditions with ongoing concerns that the eurozone debt crisis could intensify next year driving investors to sell into any rebounds in the single currency. Analysts said the European Central Bank's first ever tender of ultra-cheap three-year loans on Wednesday was not giving much support to the euro.
Doubts remained over how much of the funds will be lent on to boost the ailing eurozone economy or peripheral sovereign bond markets as banks deleverage and cut back exposure to government debt. Market players said the looming threat of eurozone sovereign downgrades was also keeping investors on edge through the year-end season and into 2012. On Thursday, investors awaited data on US GDP, jobless claims and consumer sentiment.
The euro rose to a session high of $1.3120 in early European trade, before pulling back to $1.3070 on steady selling by an Asian central bank and macro funds. Traders cited stop loss orders lurking below $1.3030. It hovered near an 11-month low of $1.2945 struck last week.
A total of 523 banks borrowed nearly 490 billion euros in loans from the ECB, but analysts were sceptical about whether the liquidity could alleviate funding tensions for some eurozone sovereigns. "In the longer-term the liquidity provided yesterday is not going to solve the debt crisis, it is not going to help southern European countries with their problems in getting control of their public debt," said Niels Christensen, FX strategist at Nordea.
There was also little evidence so far that the banks would be keen to use the funds to buy Italian and Spanish debt and help pull the borrowing costs of those countries lower.
Eurozone bond markets are expected to come under fresh pressure with some 230 billion euros of bank bonds, up to 300 billion in government bonds, and more than 200 billion euros in collateralised debt all maturing in the first quarter of 2012.
The dollar index dipped 0.2 percent to 79.865, holding near last week's 11-month peak of 80.73, while the greenback stayed tethered in range against the yen, last fetching 78.10. It has been tied to a roughly 2-yen-wide band since Tokyo stepped into the market to stem its currency's strength on October 31. The Australian dollar rose nearly 0.5 percent to session high of A$1.0144, tracking a rise in European stocks and suggesting slight demand for relatively risky assets.