* Single currency nears 8-yr trough vs yen
* Austria aims for European ban of naked shorts - FT
* Euro support seen at $1.2133, then $1.2000
* Dollar, yen benefit as investors shun risk, seek safety
By Rika Otsuka
TOKYO, May 19 (Reuters) - The euro fell to its lowest in more
than four years against the dollar on Wednesday as a sell-off in
the single currency gathered pace after Germany's move to ban
naked short-selling of some securities rattled investors.
Germany on Tuesday announced a ban that covered some
high-risk bets involving euro-denominated government bonds,
credit default swaps based on those bonds, and shares in
Germany's 10 top financial institutions. []
Analysts said that Germany's regulation would do little to
help fix Europe's debt crisis, and that the ban has left foreign
exchange as the only market where investors fell free to bet
against European assets.
"Stocks and CDS trading are now regulated. The government
bond market is supported by the European Central Bank's buying.
So investors have no place but the currency market to express
their views on Europe," said Masafumi Yamamoto, chief FX
strategist Japan at Barclays Capital.
Meanwhile, the dollar and the yen benefited as players sought
the safety of the greenback, the world's most liquid currency,
and the low-yielding Japanese currency.
The dollar index, which tracks the U.S. unit's performance
against a basket of major currencies, rose to a 14-month high of
87.458 <.DXY><=USD>.
The euro was down 0.1 percent at $1.2193 <EUR=>. In early
Asian trade, it slid as low as $1.2143 on trading platform EBS,
its lowest since April 2006.
Traders said option barriers at $1.22 were taken out and more
are lined up at $1.21, $1.20 and right down to $1.15.
The euro's next support is seen at $1.2133, a 50 percent
retracement from its all-time low of $0.8225 hit in October 2000
to its record peak of $1.6040 reached on EBS in July 2008.
If that level is broken, the next support level would be at
the psychologically important $1.2000.
WIDER BAN, FURTHER FALL
The euro has fallen about 15 percent against the dollar so
far this year, hammered by concerns that Europe's debt problems
and austerity measures could hamper the euro zone's economic
recovery.
In addition to these fiscal and recovery worries, investors
are now eyeing whether other nations will follow Germany as a
wider ban could squeeze liquidity in euro zone markets.
Austria's finance ministry is pushing for a Europe-wide ban
of naked short-selling of some financial stocks and debt
securities, the Financial Times reported on Wednesday.
[]
Traders said Germany's move limits risks players can take in
euro assets, likely prompting investors to shift their funds
elsewhere. A wider ban would only spur the outflow of money from
the euro zone, putting downward pressure on the single currency,
they said.
"There is some sense of security in holding euro assets as
long as money is shifting to Bunds from Greek government bonds,"
said Jun Kato, senior manager of the investment department at
Shinkin Asset Management.
"But that would all change if investors started selling
government debt in Germany and France, with money fleeing from
the euro zone. This regulation has a danger of prompting fund
outflows."
Against the Japanese currency, the euro slid 0.4 percent to
112.13 yen <EURJPY=R>, crawling towards an eight-year low of
110.49 yen struck earlier this month.
The yen rose across the board, lifted by investor risk
aversion moves. The higher-yielding Australian dollar dropped 0.9
percent to 78.58 yen <AUDJPY=R>.
The greenback fell 0.4 percent to 91.91 yen <JPY=>.
Sterling fell as low as $1.4239 <GBP=D4>, its lowest since
late March 2009. The pound is under pressure on concerns that
potential monetary tightening, added to imminent fiscal
tightening, may derail the economy's recovery.
(Additional reporting by Anirban Nag in Sydney and Kurishna
Kumar; Editing by Joseph Radford)
