* Euro sheds early gains versus dollar <EUR=>
* Ireland requests aid; peripheral worries remain
* Moody's says multi-notch Ireland downgrade likely
(Adds quote, detail)
By Jessica Mortimer
LONDON, Nov 22 (Reuters) - The euro erased gains on Monday
as a brief flurry of optimism after Ireland sought a bailout
faded, with concerns about possible contagion to other highly
indebted euro zone states keeping investors wary.
Many were worried the European/IMF rescue package might not
be effective in the long term and that it would not stop markets
from targeting fellow straggler Portugal. []
[]
"The market is split between those who think the deal
reduces the risks going into the year-end and those who think
the fact that Ireland followed Greece (in requesting a bailout)
in relatively short succession is a euro negative," said Paul
Robson, currency strategist at RBS.
Rating agency Moody's said a "multi-notch downgrade" on
Ireland was now likely [].
Political instability was also a concern as Ireland's Green
party, the junior coalition partner in the government, said a
general election should be held in January. []
The euro was down 0.1 percent against the dollar at $1.3661
<EUR=>, more than a cent off an earlier one-week high of
$1.3786, when it pierced the 38.2 percent retracement of its Nov
4-18 fall at $1.3765.
Analysts said a sustained break of $1.3765 would be needed
for a further correction towards resistance at $1.3864, a 50
percent retracement of that November sell-off.
"The market is sceptical as there are still fiscal issues
with Portugal and Spain. Investors have been undecided on the
euro for a while now and I can see that uncertainty lasting into
year-end," said Jane Foley, senior currency strategist at
Rabobank.
EURO LONGS REDUCED
Data from the U.S. Commodity Futures Trading Commission
showed on Friday highlighted uncertainty as speculators more
than halved net euro/dollar long positions to 8,606 contracts
last week from 23,283 the week before. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Ireland requests international bailout []
Europe debt problems []
Euro zone debt struggle: http://r.reuters.com/hyb65p
Multimedia on euro zone crisis http://r.reuters.com/hus75h
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The size of European Union and International Monetary Fund
aid for Ireland has yet to be decided but is likely to be
smaller than Greece's 110 billion euro bailout last May. A
senior EU source said it could total 80 to 90 billion euros.
The single currency also cut gains against the yen to trade
flat at 114.12 yen <EURJPY=>, while the U.S. dollar index <=USD>
<.DXY> was steady at 78.482.
Dealers said trade was thin partly due to a Japanese market
holiday on Tuesday and a U.S. market holiday on Thursday.
The greenback was up slightly versus the yen at 83.50 yen
<JPY=>, with its surprise rebound this month from a 15-year low
of 80.21 keeping many traders positive in the near term.
Technically, the attention is on whether the dollar can rise
sustainably above its daily Ichimoku cloud, now at 83.64. But
traders said options expiries on Monday, reportedly at 83.00,
83.15, 83.25 and 83.50 yen, may keep it hemmed in a tight range.
AUSSIE OUTPERFORMS
The Australian dollar <AUD=D4> outperformed, rising 0.2
percent to $0.9878, with an initial improvement of risk appetite
after the Ireland deal helping it shrug off further Chinese
tightening measures announced on Friday.
It was off a high of $0.9955, however, as European stocks
turned negative. []
The New Zealand dollar <NZD=D4> tumbled 0.7 percent after
Standard & Poor's downgraded the outlook for New Zealand's
foreign currency debt, citing a widening current account deficit
and credit risks in its banking sector. []
(Additional reporting by Neal Armstrong; Editing by John
Stonestreet)
