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Euro rises as Irish concerns ease

NEW YORK (Reuters) - The euro is likely to remain stable next week after rising for three straight days against the dollar as worries about debt-strapped Ireland have eased, although lingering worries about the risk of contagion to other euro zone economies could curb further gains.

The euro on Friday rose across the board. In late afternoon trading, the euro was up 0.3 percent at $1.3684, after rising as high as $1.3733 on trading platform EBS.

After sliding to a seven-week low of $1.3446 earlier in the week, the euro ended the week little changed against the dollar. On the month, however, the euro was still down two percent.

Hopes that Ireland was near a deal to get tens of billions of euros from its European partners and the IMF helped push the euro above $1.37 overnight.

Momentum, however, stalled ahead of resistance around $1.3750. Traders said this level is likely to hold until markets get more details on the Irish rescue plan.

In the currency options market, euro sentiment stabilised for now. The one-month euro/dollar risk reversal, a barometer of currency sentiment, started to creep higher, suggesting investors near-term are starting to get less euro-bearish.

The euro's risk reversal still showed a "put" bias, but it has risen from extremely low levels. On Friday, puts traded higher - a mid-market of -1.175 vols, with bids at -1.55 vols. On Thursday, bids on euro puts were at -1.60, down from -2.025 early this week, a roughly two-and-a-half-month low.

"Overall, with the crisis in Ireland likely coming to a close, for now...(this) means dollar may soften a bit versus the euro as investors consolidate their short positions," said Marc Chandler, global head of currency strategy, at Brown Brothers Harriman in New York.

In the US, investors will also focus on a slew of US data in a holiday-shortened week including revised figures on gross domestic product for the third quarter, durable goods orders, and personal income. All should point to an economy that is gradually getting back on track, analysts said.

The minutes of the last Federal Reserve meeting are also due for release next week, but they are not likely to generate much buzz given the extent that markets had priced in quantitative easing before the Fed announced the policy on November 3.

The minutes may give some clues on what it would take to see a third round of QE.

Outside of data in the US, which celebrates the Thanksgiving holiday next Thursday, markets will remain focused on developments in Ireland.

A deal to help Ireland cope with its battered banks will be unveiled this week, EU sources said on Friday. Ireland will publish the details of a four-year fiscal plan to save 15 billion euros at roughly the same time.

Avery Shenfeld, semnior economist at CIBC World Markets in Toronto said Ireland is a "peek as to what still lies ahead economically for larger Spain, which along with Portugal could be the next target for bond-market vigilantes.

Mr. Shenfeld said Spanish debt risks represent a much bigger cloud over Europe's other banks, and Spain could need a much larger backstop loan if it fails to hit its deficit targets.

"All good reasons why, at least until the dust settles, it's worth paring positions in the euro," said Shenfeld.

James Dailey, chief investment officer and senior portfolio manager at TEAM Asset Strategy Fund, a mutual fund based in Harrisburg, Pennsylvania, echoed Shenfeld's view.