* Euro hits 1-month low vs dollar, yen on risk aversion
* Threat of S&P Spain ratings downgrade weighs on euro
* High yielders such as NZ, Australian dollars suffer
* Low-risk drive prods yen to near 4-week high vs dollar
(Adds comment, updates prices, changes byline)
By Jessica Mortimer
LONDON, Jan 13 (Reuters) - The euro fell to one-month lows
against the dollar and the yen on Tuesday, hit as heightened
risk aversion sparked a rush into safer assets and by the threat
of ratings downgrades to some euro zone countries.
European shares <> tumbled 2.5 percent on increased
worries about a tough earnings season, underlining the crisis
facing the global economy and helping the low-yielding yen to
its highest level in nearly four weeks against the dollar.
Escalating risk aversion sent currencies such as the euro,
sterling and the Australian dollar lower, with the euro falling
as low as $1.3221 against a safer dollar, according to Reuters
data, its weakest since mid-December.
"Flight-to-safety remains the theme and low-yield currencies
will be favoured for the size and liquidity of the domestic
markets," Tullett Prebon head of G7 market economist Lena
Komileva.
"This bodes well for the US dollar and the yen and leaves
the euro, sterling and commodity currencies under pressure," she
said.
The euro has come under selling pressure this week as
investors await a European Central Bank policy meeting on
Thursday, when analysts expect a rate cut of 50 basis points to
2.0 percent, or possibly more.
But an additional sting to the single currency came as Spain
became the third euro zone country, along with Ireland and
Greece, to be warned by Standard & Poor's rating agency that its
credit rating is under threat [].
"These two factors of risk aversion and potential S&P
sovereign ratings downgrades are both weighing on the euro,"
Bank of Scotland Treasury Services currency strategist Naeem
Wahid said.
At 1223 GMT, the euro <EUR=> traded 0.7 percent lower at
$1.3278. Against the yen <EURJPY=R>, it slipped 0.6 percent to
118.53 yen, having fallen to 117.69 yen, its weakest in a month.
The U.S. dollar <.DXY> rose 0.6 percent against a basket of
currencies to 83.767, but dipped 0.1 percent to 89.19 yen
<JPY=>, having slipped as low as 88.80 yen according to
electronic trading platform EBS, its weakest level since
mid-December.
The high-yielding currencies also hit roughly one-month lows
against the yen <NZDJPY=R> <AUDJPY=R> as investors unwound yen
carry trades, in which the low-yielding Japanese currency was
used to buy assets in higher-yielding ones.
The Australian dollar fell by nearly 2 percent against the
U.S. dollar <AUD=> to $0.6683, with sharp falls in commodity
prices also weighing.
The major loser, however, was the New Zealand dollar <NZD=>,
which tumbled 3.5 percent to $0.5545, hit by an S&P downgrade
threat as the country sinks deeper into recession and struggles
to fund its current account deficit [].
EURO PRESSURED
S&P's warning on Spain triggered an extreme widening in
intra-euro zone government bond spreads, driving some yield
premiums over benchmark German Bunds to their biggest on record.
"The negative news coming out the euro zone is pretty
relentless at the moment," said Christian Lawrence at RBC,
adding that this could push the single currency even lower in
the near term.
Speaking earlier on Tuesday, the European Central Bank gave
no hint on interest rates but said the euro zone economy is
facing pressing challenges and that there is "no time for
complacency" [].
Investors awaited a speech by Federal Reserve President Ben
Bernanke in London at 1300 GMT. Investors are looking for any
more clues on plans for quantitative easing measures the U.S.
central bank might take after slashing interest rates to
virtually zero last month.
(Reporting by Jessica Mortimer; Editing by Victoria Main)
