* Euro rallies after strong German, French GDP data
* Euro zone growth suggests ECB will keep raising rates
* Single currency breaks above key technical resistance
(Adds comment, details, updates prices)
By Naomi Tajitsu
LONDON, May 13 The euro rose against the dollar on Friday after strong growth data in France and Germany bolstered speculation that a healthy euro zone economy would keep interest rates in the region higher than U.S. ones.
The single currency jumped to a session high of $1.4340 after higher-than-expected first-quarter GDP data in the two countries prompted demand for the euro from Asian sovereign names, European real money accounts and leveraged funds. [ID:nLDE74C0FI]
Market participants said higher shares and commodities also helped to stoke demand for riskier assets after they took a hit this week, and that the single currency may gain more during the day as investors continue to cover short euro positions.
"We've had the stronger European GDP numbers ... and it's starting to feel like we're getting to the end of the risk aversion trade," said Geoff Kendrick, currency strategist at Nomura.
At 0953 GMT, the euro EUR= was 0.3 percent higher on the day at $1.4290, paring some gains as traders cited an Asian sovereign name selling around the session peak.
The German economy grew 1.5 percent in January-March from the previous quarter, while French GDP rose 1.0 percent during the same period. Both readings exceeded forecasts, as did a 0.8 percent rise in the overall euro zone economy.
The figures suggested the two major economic engines of the euro zone were chugging along even as weaker member nations including Portugal entered a technical recession.
Investors took the strong figures as a cue to pick up the euro, which has fallen sharply in the past week or so as commodity markets have sold off and speculation simmers that Greece may need to restructure its massive debts.
The euro was supported after breaking above resistance at $1.4270, its 55-day moving average, and Kendrick at Nomura said the single currency may gain more later in the day as investors scramble to put on long positions cut earlier in the week.
Gains for the euro helped put the dollar under broad selling pressure, with the U.S. currency slipping 0.4 percent against a currency basket to 74.947.
The U.S. currency relinquished some gains made in the past week or so when a recent rout in commodities such as silver XAG= and oil LCOc1 hurt risk appetite and prompted traders to brace for the possibility of further unwinding of dollar-funded bets on risky assets.
Friday's GDP data supported the euro as it fuelled market expectations that a buoyant economy will increase inflation risks and keep the European Central Bank positioned in favour of raising interest rates from 1.25 percent in coming months.
This would be positive for the euro, as the Federal Reserve's commitment to keep U.S. rates near zero will increase the dollar's rate disadvantage against the single currency.
While rate differentials will offer support to the euro, analysts pointed out downside risks next week, as Eurogroup finance ministers are due to meet on Monday, followed by an Ecofin meeting of EU finance ministers. [ID:nLDE66D1JB]
There are doubts whether a substantial agreement to help Greece manage its debts is likely to emerge from such meetings of euro zone finance ministers, keeping uncertainty high over how long Greece can avoid a restructuring.
Some analysts argued this would keep a investors reluctant to load up too much on risky assets.
"Concerns about a potential delay in the progress of additional aid for Greece will give investors more time to fret about whether a Greek debt default would expose weakness in European banks beyond Greece's borders," Rabobank analysts said in a note. (Editing by Toby Chopra)