(Reuters) - The euro rose for a fourth straight session against the U.S. dollar on Thursday, bolstered by solid demand at Spanish and French debt auction, although traders were inclined to view its gains as good selling opportunities.
Spain sold 3.75 billion euros of three bonds at the top of the targeted range, although its cost of borrowing was the highest in 14 years and at levels seen as unsustainable for public finances. France also found demand for its sale of 4.35 billion euros of debt in several maturities.
While the rising interest rates that euro zone governments are forced to pay is widely acknowledged as unsustainable, the fact that market demand was strong has for now, alleviated some concerns about government funding issues, said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
In early New York trading, the euro was up 0.3 percent at $1.34760. On Wednesday, the euro had hit a one-week high of $1.35337 on trading platform EBS after central banks of the United States, euro zone, Canada, Britain, Japan and Switzerland cut the cost of dollar loans to the banking system.
The euro also rose to a two-week high against the yen, but analysts were not convinced the common currency had much scope for further rallies. Although investors cheered Wednesday's joint central bank action they are worried that the euro zone debt crisis remains unresolved, with little time for politicians to find a solution.
A break above $1.3533 could see the euro rise toward its November 18 high of $1.3615, analysts said. If it fails to retest Wednesday's high, however, the rally may peter out, while traders said the currency may be influenced by a reportedly large options expiry at $1.3500 later in the day.
Shaun Osborne, chief currency strategist at TD Securities in Toronto, said a strong U.S. manufacturing index figure or hints from French President Nicolas Sarkozy about considerable progress on fiscal integration within the euro zone could see a push toward $1.3554. He added though that the market's strategy remained selling the euro on any significant rally.
The recent run of positive U.S. economic data has stoked bids in riskier currencies such as the euro, away from the safe-haven dollar and a robust number for a key U.S. manufacturing index due out later in the session could see a repeat of a sell-off in the greenback.
Thursday's data showing a rise in U.S. weekly jobless claims to 402,000 in the latest week, has spurred some dollar buying at the euro's expense.
On the euro zone, many analysts are awaiting Sarkozy's speech on the euro zone crisis at around 1730 GMT for an update as to what euro zone policymakers have planned to prevent the debt crisis from spreading to other healthier economies in the region.
European Central Bank President Mario Draghi highlighted the euro zone's fragile outlook, saying downside risks to the economy have increased and that the bank's temporary measures are only limited.
That reinforced a market view that the ECB could cut interest rates and extend its liquidity measures when it meets to decide on monetary policy next week.
More important for markets will be whether European leaders are able to agree on a comprehensive solution to tackle the debt crisis at a European Union summit on December 9.
The U.S. dollar index .DXY was down 0.2 percent at 78.254, though off a low of 77.923 hit on Wednesday.