* Euro on track for worst month since May
* Aussie loses steam after rebound on current account data
* Yen ticks up on month-end corporate flows
By Hideyuki Sano
TOKYO, Nov 30 (Reuters) - The euro paused near 10-week lows
on Tuesday but few traders think the worst is over for the single
currency after a rescue package for Ireland failed to dampen
speculation that other bailouts will be needed in the euro zone.
Many traders expect more selling in the euro after Italian
<IT10YT=TWEB> and Spanish <ES10YT=TWEB> 10-year bond yields
jumped by more than 20 basis points on Monday, highlighting the
lack of confidence in the deal to help contain Ireland's crisis.
The euro managed to hold above a 10-week low of $1.3086
<EUR=> hit on Monday on trading platform EBS, helped by
short-term oversold technical signs, but it slid to its latest
two-month low against the yen and the Swiss franc <EURCHF=R>.
It also eased below its 200-day moving average at $1.3128, as
a 3 percent fall in shares in Shanghai <> dented investor
appetite for risk in general and brought a brief bout of euro
short-covering to an end.
The single currency slipped 0.2 percent on the day to
$1.3100, with two traders reporting talk of options at $1.3050
and $1.3000, which could generate some hedge-related euro
support, as well as automatic sell orders at those levels.
"You probably have more selling to come through. Movements
in European bond yields were savage last night ... and that's a
reflection of the concern that is evident in the market. I
don't think this is over just yet," said Richard Grace,
currency strategist at Commonwealth Bank.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Euro zone debt timeline: http://link.reuters.com/nyx95q
Take a Look on Irish bailout: []
Euro zone crisis : http://r.reuters.com/hus75h
Graphic on debt problems: http://r.reuters.com/zem66q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro has fallen about 6 percent against the
dollar this month and is on track for its worst monthly
performance since May, when it posted a 7.5 percent decline.
Momentum indicators such as stochastics show the downside for
the euro has become quite stretched, suggesting a snapback may be
on the cards in the very short term.
But speculators were only mildly short the euro in the week
ending Nov. 23, following nine weeks of being long, according to
data from the Commodity Futures Trading Commission. []
That means in terms of positioning, there is little to stop
the euro falling further, said Gareth Berry, strategist at UBS.
"On the contrary, with extensive dollar shorts still in play,
further euro/dollar weakness looks like the path of least
resistance as year-end approaches," he wrote in a client note.
The euro faces the immediate test of a 0.5 billion euro offer
of Portuguese bills on Wednesday and Spain's estimated 3 billion
euro sale of 3-year bonds on Thursday after a lacklustre Italian
debt sale on Monday highlighted concern over euro zone debt.
As falling euro zone bond prices are seen hurting European
banks that hold sizable amounts of such debt, some traders are
starting to expect an eventual test of the August low of $1.2588.
"There are just so many worries over the euro zone. The euro
will test the $1.20-1.25 area this month. I think it could fall
to $1.20 in the first quarter of next year," said Hideki Amikura,
forex manager at Nomura Trust and Banking.
FUND SHIFT
Noting that U.S. shares fell much less than European stocks
on Monday, Amikura also said investors could be shifting funds to
the United States from Europe.
The euro fetched 110.11 yen, down 0.4 percent after dipping
as far as 109.97 yen <EURJPY=R>, its lowest since Sept. 15, the
day of Japanese yen-selling intervention.
It flirted with a 10-week trough against sterling after it
fell as low as 0.8408 pounds <EURGBP=R> on Monday, and it dropped
as far as 1.3080 Swiss francs, its weakest since late September.
The dollar slipped against the yen on month-end selling by
Japanese exporters. It fell 0.2 percent to 84.09 yen <JPY=>, but
remained in sight of Monday's two-month high of 84.41, having
risen nearly 5 percent from a 15-year low of 80.21 yen on Nov. 1.
The Australian dollar <AUD=D4> slipped into the red at
$0.9618 as investors turned cautious on risk, erasing gains made
after a batch of Australian economic data lessened the risk of
unwelcome weakness in third-quarter GDP due on Wednesday.
It has fallen some 5 percent from a 28-year peak of around
$1.0183 set early in the month.
The U.S. dollar remained solid, with its index against a
basket of major currencies <.DXY> staying near Monday's two-month
high of 81.142.
Now at 80.87, the index could target its 200-day moving
average of 81.78.
(Additional reporting by Ian Chua in Sydney and Charlotte Cooper
in Tokyo, Reuters FX analysts Krishna Kumar in Sydney and Rick
Lloyd in Singapore; Editing by Edwina Gibbs)
