* Dollar buybacks continue after strong U.S. jobs data
* Euro falls to post-QE low, debt worries resurface
* Yen crosses fall as euro/yen selling pressures, kiwi down
By Hideyuki Sano
TOKYO, Nov 8 (Reuters) - The dollar rose sharply on Monday as
unwinding of dollar short positions that began with solid U.S.
jobs data snowballed, pushing down the euro to its lowest level
since the Federal Reserve embarked on fresh easing last week.
Worries about debt problems in Ireland and other euro zone
countries -- while hardly new to markets -- were also cited as
hurting the common currency as markets look for trading factors
now that the Fed's quantitative easing has become reality.
Traders said the euro triggered a succession of automatic
sell orders as it fell against the dollar, and euro/yen selling
out of Tokyo was also said to have helped send the euro lower,
which in turn weighed on other currencies against the yen.
On the charts, euro support is expected first off at $1.3920,
the day's low, then at $1.3865, its November low, if the dollar
builds on gains made after U.S. jobs data blew past expectations
on Friday. []
"As we've had a good run on positive U.S. data, the market is
buying back an oversold dollar," said Keiji Matsumoto, strategist
at Nikko Cordial Securities.
The euro <EUR=> shed 0.4 percent to $1.3970 after triggering
stops as it fell through $1.4010 and then $1.3990, its low of
last Wednesday when the Fed announced plans to purchase $600
billion of Treasuries.
The $1.3920 support is the 61.8 percent retracement of its
Oct. 20 to Nov. 4 rally to a 10-month high of $1.4283. It has
further support at $1.3835, the 76.4 percent retracement of the
same rally.
"I think the euro could fall to around $1.37, though I think
its trading range since October will hold," Matsumoto said.
Many traders say debt problems in some euro zone countries
have reappeared on their radar. The euro was sold heavily earlier
this year as Greece struggled to finance its rising debt.
On Friday, the cost of protecting Irish government bonds from
default and the 10-year Irish bond yield spread over benchmark
German debt hit record highs, weighing on the single currency.
"Given the broader spread widening on the periphery and some
ebbing in euro zone data and some pick-up in U.S. data, I'd
suggest the euro may be a sell this week," said Greg Gibbs,
strategist at RBS in Sydney.
Short dollar positions built up ahead of the Fed's latest
measure to shore up the U.S. recovery and a bout of
short-covering was not unexpected.
The dollar index <=USD>, a measure of its performance against
a basket of currencies, rose 0.6 percent to 76.89, past
resistance at 76.60-70 and on course for a possible test of
resistance at 77.10, where its 14-day moving average sits.
The dollar was flat against the yen at 81.20 yen <JPY=> and a
full yen above its 15-year low of 80.21 yen plumbed last week.
The market has been nervous that Japanese authorities could
intervene if the yen rises too rapidly, but data on Monday showed
they only stepped into the market once in September - on Sept.
15, the day they announced they were intervening. []
Dollar/yen's 21-day moving average is now at 81.25 yen and a
break above that could fuel more short-covering, though traders
expect it to be capped at 82 yen by sales from Japanese
exporters.
"I think dollar/yen will eventually rise given the backdrop
of a broad rebound in the dollar, though I suspect there will be
very heavy offers around 82 yen," said a trader at a Japanese
brokerage house.
Selling in cross/yen also kept dollar/yen in check, some
traders said.
AUSSIE DROP
The Australian dollar <AUD=D4> dropped 0.2 percent to
$1.0144, backing off a 28-year peak of $1.0182 scaled on Friday.
The New Zealand dollar fell more than 1 percent to a low of
$0.7868 <NZD=D4> at one point, hit by investor buying into the
Aussie/kiwi cross which fell to two-month lows last week. []
Still, prospects for the greenback to perform against
higher-yielding currencies remain weak at best, as the market
sees the Fed's commitment to inject $600 billion to boost a
flagging recovery as greenlight to use the dollar as a funding
currency.
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PDF on Fed decision: http://r.reuters.com/cyh73q
More stories on Fed policy: []
Take-a-look on criticism before G20 []
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Despite criticism from some G20 countries that the Fed's easy
stance is fuelling asset bubbles outside the United States, Fed
chairman Ben Bernanke on Saturday defended the move, saying it
was critical for global stability that the U.S. economy regains
its strength.
Against the gloomy U.S. and euro zone backdrop,
commodity-based currencies such as the Australian dollar are
likely to remain favoured.
Indeed, the euro dropped to a two-month low against the
Aussie to A$1.3746 <EURAUD=R>, not far from its record low around
A$1.3654 hit in September.
"We see the Reserve Bank of Australia still looking to hike
rates over coming months and tentatively pencil in a
25-basis-point December hike," said Nomura analysts.
(Additional reporting by Charlotte Cooper in Tokyo, and Ian Chua
and Reuters analyst Krishna Kumar in Sydney; Editing by Joseph
Radford)
