Euro climbs after sale Greek sovereign bonds, remains uncertain

NEW YORK (Reuters) - The euro strengthened on Monday after Greece bond market launch seven years, but investors remained anxious over the long term ability of Athens to get affordable interest rates.

After reaching the last week a 10-month low below $ 1.33, the euro rose above $ 1.35 on Monday, the day marking the return from Greece to the capital markets for the first time since the area euro reached an agreement to help Athens in case it worsens their debt crisis.

The debt management agency said Greece State sold 5,000 million (6,720 million) in debt to seven years with a rate of 5.9 percent, more than double the performance of Germany pays on its debt.

Despite Monday's gains, analysts believe that the path upwards to the European currency is limited due to debt problems and because the weak economic growth in the euro zone will force the ECB to take a hike in interest rates .

"This is something positive after the fall in the euro last week, but not much believe in this," said Michael Woolfolk, senior currency strategist in New York Mellon BNY

Analysts said fears about the ability of Greece to continue refinancing its debt to sustainable levels, and concern over other euro area countries with high debt levels as Portugal and Spain would continue to weigh on the European currency.

Some believe that the ECB will delay a rise in interest rates until 2011, further reducing the attractiveness of the euro if the U.S. Federal Reserve raises its borrowing costs soon.

At the close of trading in New York, the euro recorded a 0.5 per cent on the day at $ 1.3478 after rising up to $ 1.3506, according to Reuters data. Against the yen, the euro gained 0.5 percent to 124.66 points.

Meanwhile, the dollar was little changed, trading at 92.47 yen.

Part of the rebound in the European currency was also awarded a withdrawal of euro short positions, scoring a record high when the fiscal problems of Greece led to the currency below $ 1.33.

"I think the events of late last week withdrew from the table of the risk of default on short-term debt, and thus part of coverage in short is the result of that," said Omer Esiner, analyst Travelex Global Business Payments in Washington.

But many analysts said the continuing fiscal problems facing Greece and other euro zone countries will keep the euro under selling pressure over the coming months.

"Yields remain high in Greece, and Greece has not yet emerged from the problems," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

By contrast, investors are slightly more optimistic about the U.S. economy. The market estimates that nonfarm payrolls report for March will be published on Friday showing the creation of 190,000 jobs.