LONDON (AFP) - The euro rose against the dollar on Tuesday as risk appetite returned to the market amid fears for the US economy, analysts said. The euro climbed to 1.2583 dollars from 1.2538 dollars late in New York on Monday. Against the Japanese currency, the dollar climbed to 87.94 yen from 87.77 on Monday. The higher levels of euribor in recent sessions combined with talk that the US economy could be on the brink of a double dip recession are having a positive impact on the euro, said Jane Foley, analyst at online trading firm The European single currency is seen as a riskier investment than the dollar, while the euribor is the euro-denominated interbank lending rate. Whether or not the euro can extend these gains from current levels this week depends on the overall level of risk aversion. The better tone of stocks in both Asian and European hours this morning weighs in favour of the euro. That said the results of stress tests on Europes banks are likely to be a thorn in the side of the euro going forward. These results are due to be published later in the summer, Foley added. Europe is set for a check-up of its banking sector intended to curb financial market tensions, including information on weak regional lenders in Germany and Spain. Before then, investors are waiting for the European Central Banks monetary policy meeting Thursday. They believe the ECBs main interest rate will remain at a record low of 1.0 percent set in May 2009 and bank president Jean-Claude Trichet will press banks again to draw on state support if necessary to bolster balance sheets. The euro could start another round of falls depending on comments by Trichet, although I believe the euro has already fallen enough, said Mizuho Corporate Bank market economist Daisuke Karakama. The yen rose against the dollar in Asian trade as figures showed a dramatic expansion in Chinas buying of Japanese bonds, analysts said. Karakama said Chinas bond buying was the only major trading peg in a day of subdued activity following the US holiday. China has dramatically expanded its investment in Japanese government bonds this year, buying a net 541 billion yen (6.2 billion dollars) of mostly short-term issues in the first four months alone. The four-month sum was more than double the 253.8 billion yen total for all of 2005, the full-year record, the finance ministry said. In trading in London on Tuesday, the euro was at 1.2583 dollars against 1.2538 dollars on Monday, at 110.66 yen (110.05), 0.8296 pounds (0.8283) and 1.3357 Swiss francs (1.3348). The dollar stood at 87.94 yen (87.77) and 1.0615 Swiss francs (1.0646). The pound was at 1.5166 dollars (1.5136). On the London Bullion Market, the price of gold rose to 1,211.15 dollars an ounce from 1,208 dollars an ounce on Monday.