* Euro near 5-wk low vs dollar on Ireland debt problems
* Technical analysts looking for daily close under $1.3690
* G20 meeting under way, market sets expectations low
(Adds detail, updates prices)
By Neal Armstrong
LONDON, Nov 11 (Reuters) - The euro fell on Thursday,
closing in on a five-week low hit the previous day as concerns
about debt woes in the euro zone periphery triggered further
selling and a potential retest of key technical support.
The yield spread between 10-year Irish and German government
bonds shot out to its widest ever as investors remain
unconvinced that Dublin will be able to carry out drastic
austerity measures to ensure it can repay its debts.
"There are mounting tensions in the euro zone, with
Portugal's bond auction yesterday showing yields are on a strong
rise," said Lutz Karpowitz, currency analyst at Commerzbank.
"This, together with problems in Ireland, is putting
pressure on the euro and I would expect further downward
movement from here," he said.
The euro <EUR=> fell 0.5 percent to around $1.3700,
approaching a five-week low of $1.3670 hit on Wednesday.
Its sell-off stopped just above $1.3690, a low hit in late
October and a level which technical analysts say the euro must
close under to make a further significant move lower.
Traders said demand for downside options was increasing,
particularly one-month $1.3200 strikes, indicating growing
speculation the pair will fall around that level soon.
The dollar index <.DXY>, which measures the greenback
against a basket of currencies, rose 0.4 percent to 77.919.
The dollar was flat at 82.20 yen <JPY=>. On Wednesday, it
rose to around 82.80 yen, just shy of 82.87 yen, the level the
U.S. currency fell to in mid-September before Japan entered the
market to sell the yen.
Some in the market said a break above that level may open
the door to more dollar gains, while traders said option
barriers at 83.00 would cap the U.S. currency's upside.
The Veterans' Day holiday in the United States, where some
markets will be shut, was helping keep the market subdued.
IRISH CDS CLIMBS
Pressuring the euro lower was a jump in the cost of insuring
Irish debt against default, which hit a record high 625 basis
points as Dublin battles to prove it does not need a Greek-style
rescue to help it reduce the worst budget deficit in Europe.
Comments from the European Commission that Ireland has not
requested any assistance from Europe did little to placate
investors, who dumped 10-year Irish government debt, expanding
the yield spread versus German ones to their widest ever.
Weariness about other vulnerable euro zone countries,
including Portugal and Spain, also sent their CDS prices to
record highs, which analysts said was impacting the euro.
"The euro faces a serious threat in the form of a spiralling
peripheral debt situation. It's only the negativity surrounding
the dollar that's saving euro/dollar from a sharper correction
lower," said Tom Levinson, currency analyst at ING.
In Seoul, Group of 20 leaders gathered to discuss currencies
and global economic imbalances, but agreement on those issues is
unlikely and few investors expect the statement will expand on a
finance ministers' agreement last month. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
G20 Take a Look: []
G20 battle lines: http://r.reuters.com/jux34q
Basel III:reshaping the rules: http://r.reuters.com/zys68p
The Fed's big gamble: http://r.reuters.com/cyh73q
After China stimulus package: http://r.reuters.com/puj74q
Live blog:
http://live.reuters.com/uk/Event/G20_Summit_in_Seoul
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Much of the disagreement on currencies lies between the
United States and China, with Washington eager to see Beijing's
currency appreciated at a faster pace.
A senior Chinese central bank official said China had no
intention to confront the U.S. over its currency rate, and that
the issue should not be politicised. []
The official also said the U.S. Federal Reserve's decision
last week to implement more quantitative easing had raised
"strong concern" among many countries.
(Additional reporting by Naomi Tajitsu; Editing by Ron
Askew/Giles Elgood)
