* Euro rebounds from 3-1/2-month low versus dollar
* Slight respite in Spain, Greek worries gives support but
euro vulnerable
* U.S. jobless claims data allays labor market concerns
NEW YORK, May 10 (Reuters) - The euro rose against the
dollar for the first time in nine sessions on Thursday,
rebounding from its recent 3-1/2-month low as stress in Spanish
debt markets eased slightly and after Greece secured funds
needed for bond repayments.
The tempering of the threat of a Greek insolvency and the
country's possible euro exit also had the single currency
rebounding from a mid-February low against the Japanese yen.
Greece averted an imminent funding crisis after the board of
the European Financial Stability Facility agreed to release a
scheduled payment. The allocation allows the
country to meet near term bond redemptions, helping the euro
stabilize after an eight day sell off.
"People came into the New York session and saw the relative
calm in the overnight and that sense of stability helped the
euro recover some of its recent losses," said Camilla Sutton,
chief currency strategist at Scotia Capital in Toronto.
"The EFSF commitment of more funds to Greece will give the
country enough cash until the summer, which is helping risk
sentiment, but also leaves plenty of time for the political
crisis to play out," she said. "There are still a lot of dark
clouds hanging over Europe which will keep the euro under
pressure."
Indeed, Greece's future in the euro zone remains
questionable, with another round of elections foreseen and
doubts about whether the country will adhere to austerity
measures needed to secure further emergency funding.
The euro last traded at $1.2964, up 0.3 percent after
hitting its lowest since late January on Wednesday of $1.2910.
Traders said next possible support for the euro was around
$1.2819, the 76.4 percent Fibonacci retracement of its 2012
rally, with the year's low around $1.2624 then coming into play.
Also boosting risk sentiment was a drop in 10-year Spanish
government bond yields after the country's government
effectively took over Bankia, one of the country's biggest
banks, in a bid to restore confidence in a sector laden with bad
debts.
Greek Leftist leader Alexis Tsipras gave up his attempt to
form a new government on Wednesday, putting Greek Socialist
leader Evangelos Venizelos in a position to make a last-ditch
attempt to form a government on Thursday.
But chances of any deal on a coalition government looked
slim after two failed attempts, making new elections in three to
four weeks the most likely outcome. With Athens at risk of
running out of cash in June, a rerun of elections could be a
make-or-break event for Greece.
"We're entering a new chapter of concern for the euro zone
and it's not one that can be resolved in the near future," said
Tom Levinson, currency strategist at ING, who expected sellers
to stamp out any short-covering rallies in the common currency.
Against the yen, the euro was up 0.6 percent at 103.58 yen
from the previous day's low of 102.73 yen, its lowest
level since February 16.
With a drop in U.S. claims for unemployment benefits, the
dollar gained against the yen as it eased concerns the labor
market was deteriorating after April's weak employment growth.
The U.S. dollar was last up 0.3 percent at 79.86 yen.
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