Euro at 2-month high, growth bets lift stocks

(Reuters)-The euro hit a fresh two-month high on Monday as hopes for a durable solution to the euro-zone debt crisis pushed the currency past key technical levels, while stocks rose on bets of higher growth in the global economy.

Prices of copper and other metals rose as the optimism about growth triggered worries about supply constraints, driving up shares of miners and natural resources companies.

Asian shares headed to a positive start, with Nikkei futures traded in Chicago up 0.9 percent at 10,415.00.

Speculation that the European Central Bank might raise interest rates also provided support for the euro, pushing it as high as $1.3683 on trading platform EBS, a fresh two-month high against the dollar. It last traded up 0.21 percent at $1.3644.

"They are closer to tightening in the euro zone with a lot less spare capacity, and it is realistic to expect the ECB to tighten before the Federal Reserve," said Kathy Lien, director of research at GFT Forex in New York.Expectations of higher rates in Europe grew after ECB chief Jean-Claude Trichet sounded tougher on inflation.

The European single currency has gained nearly 6 percent from this year's low as investors grew more confident about the euro zone's economic prospects.

Some analysts feared, however, that the rally was close to an end as political turmoil in Ireland was a reminder of the uncertainties plaguing the most indebted European countries.

"The euro's had a sharp rebound recently, but we think it's nearing its top in the bigger picture," said Ian Stannard, senior currency strategist at BNP Paribas.

"It's supported in the near-term by optimism over talks on the European rescue fund, but political problems in Ireland and Portugal show there are still lots of factors out there to hurt the currency," he added.

The U.S. dollar slipped 0.23 percent against a basket of major currencies, according to the U.S. Dollar Index .DXY. Against the Japanese yen, it fell 0.15 percent to 82.46.

STOCKS EXTEND GAINS

Global equities advanced as U.S. stocks found strength in large-cap technology and natural resources shares, which were lifted by bets on global growth prospects and Intel's gains.

The Dow Jones industrial average .DJI extended its rally after eight weeks of gains, rising 108.68 points, or 0.92 percent, to end at 11,980.52. The Standard & Poor's 500 Index .SPX advanced 7.49 points, or 0.58 percent, to close at 1,290.84, while the Nasdaq Composite Index .IXIC added 28.01 points, or 1.04 percent, to 2,717.55.

The blue-chip Dow average came close to touching the psychologically important 12,000 level, with its climb intraday to a fresh 52-week high at 11,982.94.