* Euro down more than 3 percent over three days
* Germany warns euro debt crisis must stop at Greece
* Dollar rises broadly as investors buy as safe haven
* U.S. private sector adds jobs in April
(Updates prices, adds detail)
By Steven C. Johnson
NEW YORK, May 5 (Reuters) - Fear that a euro-zone debt
crisis may spread beyond Greece knocked the euro below $1.29
for the first time in more than a year and rattled bond markets
in Portugal and Spain as anxious investors snapped up dollars.
The euro plunged as low as $1.2805 <EUR=>, its lowest since
March 2009, as German Chancellor Angela Merkel warned the debt
crisis could spread in Europe if a 110 billion euro ($146.5
billion) Greece rescue plan does not succeed. For details, see
[]
"We're at a fork in the road," she told German lawmakers.
"This is about nothing less than the future of Europe -- and
with it, the future of Germany in Europe." []
Kenneth Broux, market economist at Lloyds Banking Group in
London, said traders are gunning for $1.25 as "the next big
level on the downside."
The euro was last down 0.9 percent on the day at $1.2865
<EUR=>. Over the last three days, it has lost more than 3
percent against the dollar, its worst performance since
shedding 3.9 percent over a three-day period in January 2009.
"It's tough to see a bottom," said Joe Manimbo, a trader at
Travelex Global Business Payments in Washington. "There are
deep-seated concerns about the situation in Greece and overall
fiscal health in Europe."
The euro fell 1.3 percent <EURJPY=> to 121.29 yen and hit
its lowest level against sterling since August <EURGBP=D4>. The
dollar fell 0.5 percent to 94.14 yen <JPY=> but rose sharply
against nearly all other currencies, hitting one-year highs
against the Swiss franc <CHF=> and a basket of currencies
<.DXY>.
Sterling hit a five-week low against the dollar <GBP=D4> at
$1.5068 a day before Britain's parliamentary election, with two
polls pointing to a "hung parliament," but regrouped to trade
at $1.5111, little changed from late Wednesday.
EYES ON IBERIA
Anxious investors also cut exposure to European stocks and
drove up the cost of insuring Greek, Spanish and Portuguese
debt against default, while taking refuge in the dollar.
While Spain and Portugal are not in as parlous a bind as
Greece, both have high budget deficits and have become targets
of speculators who consider them the next weakest links in the
16-country euro zone.
Moody's on Wednesday put Portugal's credit rating on review
for a possible downgrade, and yields on short-dated Portuguese
debt soared. []
"Contagion fears are driving the market and add to pressure
on the euro, as does the ongoing civil unrest in Greece that
may make it hard to institute reforms," said Brian Dolan, chief
currency strategist at Forex.com in Bedminster, New Jersey.
The protests in Greece turned violent on Wednesday, and
three people burned to death in Athens when demonstrators set
fire to a bank to protest planned Greek tax increases and cuts
to wages and pensions. []
US ECONOMY ON THE MEND?
The dollar got an added boost after data showed U.S.
private employers added 32,000 jobs last month, bolstering the
view that U.S. interest rates will likely rise from record lows
well before rates in the euro zone. The data on hiring by
private employers comes two days ahead of the government's key
monthly report on non-farm payrolls. []
But analysts said the data was just an added incentive for
investors to do what they've been doing for weeks: buy
dollars.
"The dollar is the safe haven of first choice." said BNY
Mellon currency strategist Michael Woolfolk. "This is a market
that is looking for any excuse to sell the euro. Good news out
of the U.S. or bad news out of Europe, take your pick."
Analysts said some are wondering whether the European
Central Bank, which will hold a monthly meeting Thursday, will
buy euro zone government debt to relieve pressure on countries
hit by contagion fears. However, unnamed sources quoted by
Market News International said officials were reluctant to take
that step. []
"You can't rule out the possibility the ECB could institute
new measures, and that would amount to monetary easing, which
is not good for the euro," Dolan said.
(Additional reporting by Wanfeng Zhou and Vivianne Rodrigues;
editing by Leslie Adler)
