* Euro hits 11-wk low vs dollar; falls vs yen, Swiss franc
* Euro breaks below barriers at $1.30 before recovering
* Contagion fears weigh as peripheral bond spreads widen
(updates prices, adds quote on ECB)
By Jessica Mortimer
LONDON, Nov 30 (Reuters) - The euro slid to nearly 11-week
lows against the dollar and fell on the yen, Swiss franc and
sterling on Tuesday as a rescue deal for Ireland failed to quell
worries that other euro zone countries may need help.
The euro fell 1 percent against the dollar, breaking through
reportedly strong option barriers to take it below $1.30.
A lack of confidence the Ireland deal would contain the debt
crisis caused the premiums investors demand to hold Spanish and
Italian sovereign bonds over German debt to jump to euro
lifetime highs. Yields on Portuguese, Irish and Belgian bonds
also widened. []
"At the moment there is no confidence that any of these
(peripheral) countries can effectively fund," said Adrian
Schmidt, currency strategist at Lloyds.
"Until we get some sort of market appetite for peripheral
debt these worries will continue to weigh on the euro," he said,
adding he believed the currency could fall as low as $1.25.
The euro <EUR=> fell to $1.2979 on EBS trading systems, its
lowest since Sept. 16, before modestly recovering to $1.3013,
with traders saying model funds and other investors were buying
at lower levels.
It stayed well below its 200-day moving average, currently
around $1.3127, having closed beneath it on Monday to signal a
bearish trend ahead.
Traders said the ease with which the euro had broken key
levels in recent days reflected the extent of negative sentiment
towards the single currency, which has lost around 9 percent
against the dollar since its peak earlier this month.
Risk reversals showed a sharp increase in the premium
charged for buying euro puts -- bets on the currency falling --
over euro calls, with the one-month euro/dollar 25-delta
<EUR1MRR=ICAP> trading at around 2.45 for euro puts. This is up
from 1.95 on Monday and nearing highs hit in June close to 3.0.
The dollar gained broadly, hitting a two-month high of
81.346 against a currency basket <.DXY>, lifted by safe-haven
flows and recent evidence of an improving U.S. economy.
BEARISH SENTIMENT
The latest positioning data from the Commodity Futures
Trading Commission showed speculators going net short on the
euro for the first time since Sept. 14 [], but traders saw
scope for more adjustment.
"With euro positioning nowhere near any extreme there is
more scope for downside over the coming sessions," a
London-based trader said. "Flows retained a negative euro bias
with macro funds selling euro cash and positioning to the
downside via options."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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
Euro correlation with Greek and Irish bond spreads
http://r.reuters.com/paf66q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The single currency slid to 1.2972 Swiss francs <EURCHF=R>,
108.90 yen <EURJPY=R>, and 83.665 pence against sterling
<EURGBP=D4>, all more than 10-week lows.
"The most liquid form to express a negative view on the euro
zone now is through the euro," said Ray Farris, currency
strategist at Credit Suisse. "One can see a fire stop if the
European Central Bank decides to allow banks continued access to
its balance sheet when it meets on Thursday."
The ECB is widely expected to keep rates on hold and sources
say it could extend banks' access to unlimited three-month funds
beyond January. [].
That could help ease some of the funding strains that the
banks in peripheral euro zone economies are currently facing.
The higher-yielding Australian dollar <AUD=D4> also fell to
an eight-week low of $0.9566 as worries about Chinese tightening
hurt risk appetite.
(additional reporting by Anirban Nag)
