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Euro rebounds from one-year low against the dollar

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NEW YORK: The US dollar fell against the euro in volatile trade on Wednesday, as the market lurched amid the latest moves to ease Europe's debt crisis and showed little reaction to a Federal Reserve decision to keep rates unchanged.

The euro rebounded from fresh one-year lows against the dollar early in the day, as fears of Greece's debt woes spread to Spain, which saw its credit rating downgraded.

The single currency had been pummelled on Tuesday by news that Greece's debt was downgraded to junk status and Portugal's was also revised down.

But the euro, which fell as low as 1.3128 dollars, managed to rise to 1.3201 by 2230 GMT, up from 1.3172 on Tuesday as Germany appeared more willing to help provide Greece with a much-needed bailout.

"The euro was supported by report that the EU and IMF may increase aid to Greece to 120 billion euros over three years and in reaction to rhetoric from German officials pledging solidarity with Greece," said Michael Malpede at Easy Forex.

"Currencies attempted to repair wounds inflicted by yesterday's harsh sell-off," said Kathy Lien of Global Forex Trading.

"Concerns over debt crises subsided in favour of focusing more on the Fed's rate decision and a continuous stream of positive earnings announcements in the US," she added.

The Federal Reserve meanwhile on Wednesday gave a more upbeat assessment of the US economy as it kept ultra-low interest rates in place.

Pointing to a slightly quickening economic recovery, the Fed said labour and housing markets showed glimmers of improvement and spending had ticked up.

"Economic activity has continued to strengthen and... the labour market is beginning to improve," the Federal Open Market Committee said.

In late New York trade. the dollar rose against the Japanese unit to 94.05 yen, from 93.27 yen a day before.

The pound fell to 1.5200 dollars from 1.5260 dollars on Tuesday.

The dollar was down against the Swiss franc, to 1.0857 from 1.0882 on Tuesday.

With the crisis deepening in Europe, Germany came under growing pressure to stop stalling the activation of a European Union-IMF bailout.

European Central Bank President Jean-Claude Trichet warned time was fast running out and Germany must quickly decide whether to contribute its share.

"There is an absolute necessity to decide very rapidly," he said after meeting German Finance Minister Wolfgang Schaeuble, International Monetary Fund chief Dominique Strauss-Kahn and top German lawmakers in Berlin.

Strauss-Kahn warned: "It is the confidence in the whole zone that is at stake," referring to the 16 countries that share the single currency.

Separately US President Barack Obama called German Chancellor Angela Merkel, with both leaders stressing the need for "resolute action" to tackle Greece's spiralling debt crisis, the White House said.

"They discussed the importance of resolute action by Greece and timely support from the IMF (International Monetary Fund) and Europe to address Greece's economic difficulties," the White House said. - AFP/de
 
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