Euro up 2nd day on crisis hopes but caution abounds

(Reuters) - The euro rose against the dollar for a second straight session on Tuesday in cautious trade on talk the European Central Bank could lend money to the International Monetary Fund to help stem the debt crisis.

The euro zone is discussing the option of financing emergency help for Italy or Spain by using money from national central banks to boost International Monetary Fund resources - but only as a last resort, euro zone officials said.

Euro zone ministers struggled to ramp up the firepower of their rescue fund and raised the possibility of asking the IMF for more help on Tuesday after Italy's borrowing costs hit a euro lifetime high of nearly 8 percent.

Talk of an ECB/IMF deal implies that the Europeans are really having trouble coming up with any new schemes to stabilize the region, according to Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey.

"The rally in the euro today was sparked by what would normally be extremely negative news for the currency."