* Euro rises on easing worries over Irish debt crisis
* U.S. factory, job data show economic strength
* Aussie, kiwi dollars gain as risk appetite increases
(Adds quote, updates prices)
By Wanfeng Zhou
NEW YORK, Nov 18 (Reuters) - The euro rose on Thursday on optimism Ireland will get loans to ease its banking and debt crisis, but the gains may prove short-lived as investors remained concerned about the risk of contagion to the rest of Europe.
The euro earlier climbed about 1.0 percent versus the dollar and yen as the cost of insuring Irish debt against default fell after Ireland's central bank chief said he expected Dublin to receive tens of billions of euros in loans from European partners and the IMF.
Analysts cautioned, however, that lingering worries about other debt-stricken European economies including Portugal and Spain will likely continue to weigh on the euro, which has lost about 3 percent this month as funds liquidated long positions.
Year-end flows could further support the dollar versus the euro. Recent U.S. data, including Thursday's regional manufacturing and leading indicators reports, has showed an improving economic picture, which could spur investors to close out short dollar positions ahead of the end of the year.
"If Ireland does get some help, it will, at least for the day, be a positive and will possibly put the euro up by a cent or more," said Nick Bennenbroek, senior currency strategist at Wells Fargo in New York. "But after that news, it probably won't take long at all before markets start turning their attention toward the next problem area in Europe."
The euro hit a session high of $1.3668 on trading platform EBS, moving away from a seven-week low of $1.3446 set on Tuesday. It was last up 0.8 percent at $1.3626. It also rose 0.9 percent versus the yen.
Traders said stop-losses were triggered at $1.3630. Resistance is at $$1.3750, followed by $1.3765, the 38.2 percent retracement of this month's fall.
Some analysts said that even if a quick resolution is reached over Ireland, market participants would fret about other peripheral euro zone economies and their debt levels, with Portugal thought to be in the market's sights.
A Spanish bond auction passed relatively smoothly, as it sold 3.7 billion euros worth of 10 and 30-year bonds, albeit at higher yields.
"The markets are not wholly convinced that contagion issues will be contained. That's why we're not seeing a really aggressive rally in the euro. Otherwise, the euro would be up at around $1.38 or $1.39," said Dean Popplewell, chief strategist of FX brokerage OANDA in Toronto. "We are certainly seeing interest to actually sell euros on rallies." Factory activity in the U.S. Mid-Atlantic region grew much more than expected in November, a survey showed on Thursday, while a separate report showed a gauge of future U.S. economic activity posted a solid rise in October.
Against the yen, the dollar was rose 0.6 percent to 83.74 yen, extending gains after U.S. data.
An increase in risk appetite boosted sentiment toward equities and commodities and drove higher-yielding currencies up. The Australian dollar rose 0.9 percent and the New Zealand dollar was up 1 percent.
The dollar index, which tracks the greenback's performance against a basket of major currencies, dropped 0.7 percent to 78.560, off Tuesday's seven-week high of 79.461.
Karen Jones, technical analyst at Commerzbank, said the U.S. dollar index has charted "a significant low" and should resume its uptrend toward the 80.00/50 key level after its latest correction.
The dollar came under pressure after data on Wednesday showed U.S. core consumer inflation rose 0.6 percent from a year ago, the smallest increase since records started in 1957, which bolstered the case for the Fed to deliver all of its $600 billion of quantitative easing. (Additional reporting by Steven C. Johnson; Editing by Andrew Hay)