Jan 10 (Reuters) - * Euro vulnerable to more losses on
euro zone debt worries
* Portugal faces growing pressure to seek EU/IMF aid-source
* This week's euro zone debt auctions in the
spotlight
* Trading thin with Japan shut for holiday
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Jan 10 (Reuters) - The euro touched
four-month lows against the dollar on Monday as stops were
triggered amid mounting worries about Europe's debt crisis,
after a source said Portugal was under growing pressure to
accept EU/IMF aid.
The single currency fell to lows not seen since
mid-September, slipping as deep as $1.2860 on trading
platform EBS, after stops around $1.2900 and $1.2870 were
triggered.
Although the euro later pared its losses on
short-covering, market players said the single European
currency still looked vulnerable due to worries about the
level of demand at euro zone debt auctions coming up this week.
"I think overall the path of least resistance is going to
be the downside for the euro," said Andrew Robinson, currency
market strategist for Saxo Capital Markets in Singapore.
Since the euro breached its 200-day moving average last
week, the next downside target may be the 61.8 percent
retracement of its rally between June to November of 2010 that
comes in right below $1.2800, Robinson said.
The euro last stood at $1.2908, steady from late U.S.
trading on Friday.
Further downside targets for the euro include its
September 2010 low of $1.2642 and then the August 2010 trough
at $1.2588.
"Longer-term players are even talking about parity,"
said a trader for a major Japanese bank in Singapore.
The common currency had already been under
pressure last week, falling from a peak of $1.3435 on Jan. 4,
as investors sold peripheral euro zone bonds ahead of new debt
supply from the likes of Portugal and Spain this week.
[]
Portugal -- seen by many as the next country after Greece
and Ireland to need bailing out -- will draw the most intense
scrutiny when it attempts to sell up to 1.25 billion euros of
five- and 10-year debt on Wednesday.
Analysts say that if investors judge that the price Lisbon
will need to pay to get funds is too high to sustain borrowing
in the long term, Portuguese bonds may sell off quickly and
force the country to seek emergency European Union and IMF
funds.
A senior euro zone source told Reuters on Sunday that
pressure was growing on Portugal from Germany and France to
seek financial help from the EU and IMF to stop the bloc's
debt crisis from spreading. []
Those comments came after a Portuguese government
spokesman denied a German magazine report that Lisbon was
under pressure from Berlin and Paris to seek a bailout.
[]
The dollar benefited from the euro's weakness. The dollar
index, which measures its performance against a basket of
major currencies, rose to a five-week high of
81.203, recovering from a brief dip following
disappointing U.S. non-farm payrolls data on Friday.
The dollar index later trimmed its gains to stand at
81.133 , steady from late U.S. trade on
Friday.
The dollar's upside looked limited after the
jobs report on Friday showed a rise of 103,000 jobs in
November, well short of economists' expectation for 175,000.
The unemployment rate at 9.4 percent was still very high,
albeit down from 9.8 percent in November as fewer people
looked for work.
That suggests the Fed will not be in any hurry to wind
down its programme of buying assets to stimulate the economy,
despite a recent string of upbeat data that pointed to a more
self-sustaining recovery.
In fact, U.S. Federal Reserve Vice Chair Janet Yellen on
Saturday defended the central bank's controversial
asset-buying efforts, citing an internal study showing the
full programme will result in a gain of 3 million jobs.
[]
The dollar held steady against the yen at 83.11 yen
.
(Editing by Kim Coghill)
