* Euro stung by Ireland bank woes, weak economic data
* Irish Q2 GDP -1.2 pct qtr/qtr
* Dlr/yen frozen on intervention concerns, Kan/Obama to meet
By Naomi Tajitsu
LONDON, Sept 23 (Reuters) - The euro retreated from a
five-month high versus the dollar on Thursday, stung by worry
over Ireland's banking sector and a contraction in the Irish
economy that underlined concern over the euro zone periphery.
Other data suggesting growth in the euro zone slowed in
September helped knock the euro from a five-month high versus
the dollar as it raised concerns about the region's recovery.
[] []
A 1.2 percent fall in second quarter Irish GDP from the
first quarter confounded forecasts for a 0.5 percent rise and
highlighted the struggles facing Ireland as it tries to shore up
its banking sector. []
"The euro downmove started even before the Irish GDP data,
as the market is worried about Irish banking sector
uncertainties," said Geoffrey Yu, currency analyst at UBS.
Ireland on Wednesday said there was no chance it or its
ailing banks would default on its debt. The government has
extended a guarantee for the short-term liabilities of its
banks, while withdrawing guarantees on some types of bank debt
at the end of the month. []
Pessimism about Ireland pushed yield spreads between 10-year
government bonds in Ireland and Germany -- the most economically
sound euro zone country -- to their widest ever.
At the same time, the five-year Irish credit default swap,
or the cost to insure against the country's default, hit a
record high of 500 basis points, helping push the euro to the
day's low around $1.3310.
By 1116 GMT, it was down 0.6 percent on the day at $1.3322,
well off $1.3441 hit on Wednesday, its highest since April, when
the dollar came under broad selling pressure on speculation the
Federal Reserve will implement more monetary easing soon.
Analysts said a weak euro zone purchasing managers' survey
had cast doubt over the European recovery, helping the dollar
recover from losses suffered earlier this week on the view that
more quantitative easing would lead to a further depreciation in
the U.S. currency.
A euro rise above $1.3400 in early European trade triggered
by selling from Asian accounts, traders said, but it hovered
above its 200-day moving average around $1.3208.
The euro also stumbled to session lows versus the yen, the
Swiss franc and sterling, pulling away from a one-month high
versus the yen <EURJPY=R> and a four-month peak against sterling
<EURGBP=D4> hit the previous day.
YEN SUBDUED
The dollar was steady at 84.40 yen <JPY=> after falling to
84.27 yen, its weakest since Tokyo intervened in the currency
market last week for the first time in six years. Markets in
Tokyo were closed on Thursday for a national holiday.
"The yen would be a lot stronger if not for intervention and
the threat of intervention," said Lee Hardman, currency
economist at Bank of Tokyo-Mitsubishi UFJ.
"The drop in short-term U.S. yields is more consistent with
80 yen rather than 85 yen," he said, adding Japanese authorities
would likely come into the market again at around 82-83 yen.
Two-year Treasury yields <US2YT=RR> hit an all-time low of
0.407 percent on Wednesday.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
PDF on Japan's yen intervention http://r.reuters.com/fac44p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Japanese Prime Minister Naoto Kan is set to meet U.S.
President Barack Obama on Thursday for the first time since
Tokyo took action in the currency market on Sept. 15, when the
dollar fell to a 15-year low of 82.87.
Obama will also meet Chinese Premier Wen Jiabao, who pushed
back against pressure to revalue the yuan as U.S. lawmakers
threatened to penalise China. []
The New Zealand dollar fell after data showed the country's
economy grew just 0.2 percent last quarter, far below forecasts.
(Additional reporting by Tamawa Desai)
