* Euro falls as euro zone fiscal woes outweigh rate view
* Moody's downgrades Spain; market fears Portugal bailout
* Chinese trade deficit hits Aussie; Sterling falls on BOE
(Updates prices, adds comment, detail)
NEW YORK, March 10 (Reuters) - The euro fell on Thursday
after a cut to Spain's credit rating kept euro zone debt
problems in focus and left the currency vulnerable to more
downward pressure in the coming weeks.
The euro fell after Moody's cut Spain's credit rating to
Aa2 from Aa1 with a negative outlook, though sovereign demand
and technical support buffered it against more intraday losses.
For more see [].
But it hit a session low beneath $1.38 after disappointing
U.S. jobless claims and international trade data added to risk
aversion by reminding investors of problems in the global
economy. [] and []
"The sovereign debt crisis has always been there, but
traders put it at the back their minds," said Gareth Sylvester,
senior currency strategist at San Francisco-based Klarity FX.
"With the reemergence of concerns on sovereign debt, why expose
yourself unnecessarily?"
Sylvester said this could be the reversal of recent
broad-based dollar weakness, though the euro declines may only
last four to six weeks before it again strengthens.
The euro <EUR=EBS> last traded at $1.3811, down 0.7 percent
and near a $1.3791 session low <EUR=EBS>. Its decline pushed it
further from a recent four-month high of $1.4036 reached after
European Central Bank President Jean-Claude Trichet hinted at
an interest rate rise in the euro zone as soon as April.
Some analysts said that was containing a further slide in
the euro for now. Traders also said Middle East and Asian
sovereign accounts bought euros near the low, suggesting
central bank demand would continue to underpin the currency.
"Our core view is unchanged: the euro should trend higher,
interrupted by periods of sovereign-fear-induced weakness,"
said Camilla Sutton, senior strategist at Scotia Capital in
Toronto. "It should close this year at higher levels than it is
currently trading and next year at still higher levels."
CHINA TRADE SCARE; BOE STANDS PAT
Against the yen <JPY=EBS>, the dollar was last up 0.3
percent to 82.91 yen after climbing to its highest since Feb.
22.
The Australian dollar fell after data showed China swung to
a surprise trade deficit in February of $7.3 billion, its
largest in seven years. []
The numbers stirred worries that China's growth could slow
and affect countries such as Australia, which has benefited
from China's expansion. The Aussie dollar was down around 0.9
percent at $1.0011 <AUD=D4>.
Sterling <GBP=D4> traded 0.9 percent lower at $1.6064 after
the Bank of England held interest rates at a record low of 0.5
percent, as widely expected.
ROCKY ROAD FOR EURO IN SHORT RUN
Technical analysts saw trendline support for the euro
around $1.3775, drawn from lows in January and February, but a
fall below that would open the door to more losses.
London-based UBS FX analyst Geoffrey Yu said the Spanish
downgrade showed the euro zone's debt crisis is far from over.
He said risks also stem from Europe's inability so far to agree
on a framework for a debt rescue fund.
European leaders and finance ministers will meet at a euro
zone summit on Friday to discuss tackling debt problems.
Brown Brothers Harriman strategists warned, however, that
the dollar could hit a wall next week if the Federal Reserve
maintains its bias in favor of record low interest rates when
it concludes a March 15 policy meeting.
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For a graphic on the U.S. trade balance:
http://r.reuters.com/rux48r
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(Reporting by Nick Olivari and Steven C. Johnson; additional
reporting by Naomi Tajitsu in London; Editing by James
Dalgleish)
