* Euro hits 1-month high vs dollar as Moody's affirms Spain
* Spanish shares up 1 pct, other European markets see
* Dollar index dips to 1-mth low, lifting gold
LONDON, Oct 17 (Reuters) - The euro touched a one-month high
against the dollar and European shares extended the week's gains
on Wednesday after Spain clung on to its investment-grade debt
The decision by ratings agency Moody's came as expectations
grow that Spain is getting close to formally requesting aid from
its European Union partners, potentially allowing the region's
central bank to begin buying its bonds.
The euro was up 0.4 percent at $1.3110, having
earlier hit $1.3125, its highest level since Sept. 17.
But investors remain cautious ahead of a meeting of European
leaders in Brussels on Thursday and Friday, where help for Spain
and Greece is expected to dominate discussions, and there could
still be public disagreement over the next steps.
"Our expectation is ... that the European summit yet again
will be a disappointment, and then it (the euro) will go back
down," said Callum Henderson, global head of FX research for
Standard Chartered Bank.
European shares were also making only modest gains ahead of
the leader's summit and the release of a batch of economic data
from China, due on Thursday, which will shed light on the extent
of the slowdown in the world's second largest economy.
The FTSE Eurofirst 300 index of top European shares
was up 0.1 percent at 1,113.94 points in early trade, helped by
strong gains in financial stocks.
Spain's IBEX index led the gains among the regional markets,
rising over 1 percent, while London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX opened with gains of
between 0.2 and 0.4 percent.
Moody's decision to keep Spain's bonds at Baa3, albeit with
a negative outlook, pulled yields on Spanish government 10-year
bonds down 24 basis points to 5.57 percent.
Meanwhile, the gains in the euro sent the dollar to its
lowest level in a month against a basket of major currencies
, with little reaction seen to the latest televised
election debate between president Barack Obama and Republican
opponent Mitt Romney.
Obama aggressively challenged Romney on jobs, energy and
Libya in their second debate on Tuesday as the Democrat tried to
reclaim the momentum in a tight White House race.
The weaker dollar, which makes dollar-priced commodities
more attractive for buyers holding other currencies, supported
precious metals, with spot gold rising 0.3 percent to
$1,752.49 an ounce.