* Euro pares losses on talk of Irish bailout package
* Trade volatile as Irish government denies talk of rescue
* China rate hike talk hurts commodities, Aussie
(Adds dropped word in paragraph four)
By Anirban Nag
LONDON, Nov 12 (Reuters) - The euro bounced from six-week lows against the dollar on Friday as EU leaders sought to reassure nervous bondholders and on speculation, quickly denied, a rescue package for Ireland was being hammered out.
The euro rose to a session high of $1.3745, rebounding smartly from its low of $1.3573 on EBS. It moved up on steady buying by macro funds as the cost of insuring Irish, Spanish and Portuguese debt against default fell after European Union leaders said holders of outstanding bonds would not be forced to take losses.
"These comments from the EU leaders have provided some support to the euro at around the $1.36 level," said Chris Turner, head of FX strategy at ING.
Talk of a report by a U.S. think tank saying the EU planned to hammer out a rescue package for Ireland as early as next week also helped the euro.
The Irish Finance ministry said market talk of a bailout package with EU was untrue, pulling the euro off its highs to trade at $1.3695.
"Ireland doesn't need to come to the market until mid 2011. Lots of things can happen in six months and I don't see why they would need a bailout now," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
Two thirds of economists and bond strategists polled by Reuters on Thursday said Ireland would seek international rescue funds before the end of next year.
Earlier a statement from France, Germany, Italy, Spain and Britain, issued at the Group of 20 summit in Seoul, said bondholders would not have to take a haircut under current debt rules, allowing Irish bond yields to fall.
Still, the euro has shed over 2 percent this week as long positions built before the Fed's bond buying decision last week have been unwound heading into the year-end book-closing season.
Analysts said the communique from G20 leaders meeting in Seoul was mildly positive as it agreed to tackle tensions that have threatened "currency wars" and trade protectionism. [ID:nSGE6AB00Y].
The G20 seemed to give the green signal to emerging countries with flexible currency regimes to impose capital controls.
"That seems to have hurt risk appetite a bit and investors are booking profits in riskier assets," ING's Turner said.
CHINA RATE HIKE TALK HITS COMMODITIES AND STOCKS
The Australian dollar, a favourite amongst investors choosing to buy into growth, sold off sharply. It shed more than 1 percent to as low as $0.9825, its lowest since Nov. 1. It was down 0.6 percent in late morning trade.
Media reports suggested China was planning to limit foreigners investing in its already speculative real estate sector while South Korea was planning capital controls.
China's key stock index posted its biggest percentage loss in 14 months, ending down 5.2 percent on Friday on talk of more monetary tightening.
Most cross-yen pairs, such as Aussie/yen, kiwi/yen, and the Canadian dollar/yen were lower on the day.
The euro fell to a two-month low against the yen, hitting 111.04 on EBS, and was last down 0.2 percent at 112.57.
"Risk is off the table," said Jane Foley, senior currency strategist at Rabobank. "These sovereign debt problems are a trigger to book profits in commodities and emerging markets assets."
The dollar fell against the yen, moving back towards its 15-year lows. It was down 0.5 percent at 82.16 yen, with Japanese exporters selling into the dollar's recent bounce.
(Additional reporting by Neal Armstrong)