* Euro turns lower vs dlr, 1-1/2 cents below day's high
* Dollar index off 16-mth low but still weak
* USD below 200-day MA vs yen; Fed seen staying put on QE2
(Recasts, adds quote)
By Jessica Mortimer
LONDON, April 14 (Reuters) - The euro turned lower against
the dollar on Thursday, dented by speculation that Greece and
possibly Ireland may be forced to restructure their massive
debts, pushing peripheral euro zone bond yields higher.
Re-emerging concerns about debt problems in peripheral euro
zone countries pushed the euro down as low as $1.4365 <EUR=>, a
cent-and-a-half below the day's high above $1.45.
Analysts expected falls to be limited, however, with the
euro still supported by expectations for higher euro zone
interest rates while U.S. policy stays loose.
Traders said the fall below $1.4450 triggered stop-loss
orders and accelerated selling after it had earlier failed to
test Wednesday's 15-month peak of $1.4521 and an options barrier
at $1.4530. It was last down 0.4 percent at $1.4388.
"The market tends to react to reports like this when the
euro is at overstretched levels and this leads to some
consolidation, but overall the medium-term trends are likely to
stay in place," said Stephan Maier, currency strategist at
Unicredit.
"For the euro to get to $1.42, the level before last week's
ECB rate hike, we would need some dovish news from the ECB or an
extremely bullish U.S. PPI number".
Support was seen around $1.4250-80, the base formed before
last week's euro zone rate hike pushed it higher.
Greece's debt costs surged after Germany said for the first
time that Athens may need to restructure its debt, a move
European Central Bank Executive Board member Lorenzo Bin Smaghi
warned would be a "catastrophe". []
ECB policymaker Juergen Stark also warned Irish banks they
cannot rely on ECB emergency funding indefinitely. []
DOLLAR/YEN WEAKER
The dollar stayed not far from an earlier 16-month low
against a currency basket after U.S. retail sales data and the
Fed's Beige Book report on Wednesday kept intact expectations
the central bank's $600 billion asset-buying programme would
stay in place until June.
The dollar index <.DXY> was up 0.1 percent at 75.086, having
earlier fallen to 74.617, bringing its losses this year to
around 5 percent. The next target is seen at 74.17, the low hit
on Nov 26., 2009.
U.S. producer prices data is due at 1230 GMT, but its impact
was expected to be limited. <ECONUS>
The dollar fell against the yen, trading down 1 percent at
83.04 yen <JPY=>. It broke below its 200-day moving average near
83.43 yen as investors cut sizeable long positions built after
the U.S. currency's speedy ascent from its record low of 76.25
in March.
One trader cited real money offers above 83.50 yen with
further falls likely to target the 100-day moving average at
around 82.72 yen.
"The dollar will continue to be undermined by the monetary
policy stance of the Fed," said Adam Myers, senior currency
analyst at Credit Agricole.
Goldman Sachs in a monthly report kept its forecasts for
dollar/yen unchanged, with the pair seen rising to 90 yen in 12
months. Overall, Goldman remained bearish on the dollar with the
U.S. bank targeting euro/dollar to rise to $1.50 in 12 months.
In contrast to the loose Fed policy, the European Central
Bank is expected to follow up its April interest rate hike with
more tightening later this year. Markets are pricing in a better
than 50 percent chance the ECB will hike in August. <ECBWATCH>
(Additional reporting by Anirban Nag; editing by Stephen
Nisbet)
