Little Reason To Buy the Euro. By Nicholas Hastings

Only the very brave will keep on buying the euro.

Sure, if the single currency has another stab at breaking over technical resistance at $1.2150, it could find some momentum to rally a little further.

However, there remains little fundamental reason why last week's steady rise in the euro, that brought it up from under $1.1900, will continue.

Both of the factors that appear to have triggered the move--strong economic data from China and an absence of further bad debt news from the euro zone--are hardly likely to last.

Let's take China first.

Reports of soaring exports and retail sales were music to the market's ears. The major engine of the world's economic recovery was proving even stronger than the market expected and helping to offset concerns about growth elsewhere.

Equity markets around the world found a new lease of life. Investors once again became risk-lovers and the euro, which had been diving since the start of the year, started to look cheap.

In the euro zone, meanwhile, the steady flow of bad news on sovereign debtors came to a halt.

In fact, a series of bond auctions across the region were largely successful, helping to convince financial markets that buyers aren't on strike, and that even the large debtors are still able to raise funds in the open market.

By the time German courts had thrown out an attempt to block Germany's participation in the euro-zone rescue package towards the end of the week, there were plenty of reasons why short-covering the euro looked like a good idea.

All the same, this bullishness will doubtlessly unravel.

Chinese growth may be strong but so is Chinese inflation and Beijing will once again be under pressure to start tightening monetary policy to prevent overheating.

The staggering 50% growth in exports that the country achieved in the year to May has already caused consternation in the U.S., with Congressional leaders warning that if China doesn't let the yuan rise soon, they will start restricting Chinese imports.

A world of trade-war threats and speculation over yuan appreciation is hardly one in which the euro will do well.

In the euro zone, meanwhile, there are is barely any assurance that last week's good fortunes will continue.

On the contrary, although euro-zone debtors might have been able to raise more funds, they have done so at a higher cost, suggesting that investors remain highly wary of lending to the region.

Sovereign debt will remain a concern and the euro remains exposed to the next reversal in sentiment.

The European Central Bank certainly hasn't helped.

After the bank's policy meeting last week, ECB President Jean-Claude Trichet missed an opportunity to clarify the bank's recent policy of buying bonds, a move that has proved contentious within the ECB itself and which has made the bank's future policy intentions even more unclear.

As the currency strategy team at Commerzbank AG said, this lack of transparency about its strategy undermines the ECB's credibility.

"As a result, the euro is suffering and there are already enough problems within the euro zone," the team said.

Early Monday the euro is struggling to get a foothold above $1.22 after finding some good buying interest during the Asia session on the back of a positive session for equities.

Around 0645GMT the euro trades at $1.2188, up from $1.2077 in late U.S. trade Friday. The pound fetches $1.4648 up from $1.4516 and the dollar is worth Y91.88, up from Y91.62.