October 10, 2011 / 2:05 PM / 6 years ago

FOREX-Euro jumps after Germany, France pledge crisis plan

* Euro on track for biggest one-day gain in 15 months

* Merkel, Sarkozy pledge plan to combat euro zone crisis

* Greece meets with officials for next round of aid

* Euro extends rise after Italian, French output data

NEW YORK, Oct 10 (Reuters) - The euro climbed to its highest in more than a week versus the dollar on Monday after Germany and France pledged to have a plan soon to protect banks and the region from its sovereign debt crisis.

The single currency, which was also helped by unexpectedly strong industrial output data from France and Italy, is on track for its best daily rise since July 2010.

After their weekend meeting, German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to present a plan before a G20 summit in early November to shore up euro zone banks, settle the Greek debt crisis and help growth in Europe.

"Certainly Merkel and Sarkozy pledging a plan to support European banks by November helped. So we're seeing risk coming back on and that's helping the euro and this rally could go on given the extent of short positioning in the market," said Marc Chandler, global head of currency strategy at brown Brothers Harriman in New York.

The euro climbed 1.8 percent to $1.3617 , above a nine-month low of $1.3145 set last week on trading platform EBS, as investors closed out their short positions initiated earlier.

Euro's rebound, however, could fade if no comprehensive plan emerges in coming weeks, with the risk of renewed bickering between euro zone policy-makers seen as a threat to quick decision making.

"But at the end of the day Greece still has problems," Chandler said.

The cash-strapped nation met with the European Union, International Monetary Fund and the European Central Bank met with Greek finance minister on Monday to complete talks for 8 billion euros worth of aid so Athens could avert a default in November.

Stronger-than-expected French and Italian outputs in August reduced fears of sharp economic pullbacks in euro zone's second and third biggest economies. They helped propel the euro higher on the day.

SLOVAKIA VOTE

The pledge from Merkel and Sarkozy, albeit short on details, gave a boost to the euro and other perceived riskier currencies. Improved sentiment led to a selling of the dollar against the Swiss franc.

Traders will now focus on the voting in Slovakia and Malta to ratify the changes to the European Financial Stability Facility, a 440 billion euro bailout fund.

They are the remaining euro zone countries that still have to approve the changes. Any delay on passing the legislation could affect sentiment toward the euro.

Adding to traders' concerns for the euro, the next aid tranche for Greece is far from being a done deal. The IMF said Greece is at a crossroads and would need to implement "much stricter structural reforms" than seen so far.

"Short positions against the euro have been stopped out which is why the euro has bounced," said Adam Myers, senior currency strategist at Credit Agricole.

The euro rose to a 4-1/2 month high against the Swiss franc , touching 1.24358 francs on EBS, on lingering speculation that the Swiss authorities could raise the floor on the euro/Swiss franc from 1.20 francs currently.

As for the dollar, it was little changed against the yen at 76.67 yen while it fell more than 2 percent against the Swiss franc at 0.9059 francs .

The dollar index declined more than 1 percent on a basket of currencies at 77.681.

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