* Euro within half a U.S cent of 14-month low vs dollar
* Worries about euro zone growth weigh on single currency
* Euro hits record lows vs Swiss franc; sterling falls
(Updates prices, adds detail, changes byline)
By Wanfeng Zhou and Steven C. Johnson
NEW YORK, May 13 (Reuters) - The euro weakened against the
dollar on Thursday and touched a record low against the Swiss
franc on fear that harsh fiscal tightening in Europe would
dampen an already-weak recovery.
While investors were relieved that Spain and Portugal were
taking steps to cut budget deficits, they also feared this
would slow down euro zone growth. That knocked the euro down to
$1.2540, about 30 cents from last week's 14-month low.
It was last trading at $1.2585 <EUR=EBS>, down 0.3 percent.
It neared $1.31 on Monday following the announcement of a $1
trillion bailout for financially troubled euro zone countries.
"There's a definite concern that the reduction in
government expenditures will cause a precipitous decline in
GDP," said Jessica Hoversen, a fixed income and currency
analyst at MF Global in Chicago. "Europe basically looks like a
zombie economy, and on top of it, you're seeing a massive
retrenchment in government spending."
Traders said the euro has broken the bottom of its recent
trading range near $1.2610 and is expected to test key support
near $1.25. Selling would likely accelerate beneath $1.25,
pushing the euro toward $1.2330, its October 2008 low.
The euro shed 0.6 percent <EURJPY=R> to 116.86 yen and hit
a record low of 1.3997 Swiss francs <EURCHF=EBS>, according to
EBS. The dollar fell 0.4 percent to 92.82 yen <JPY=>.
Sterling fell 1.1 percent <GBP=D4> to $1.4660, stung by
data showing the UK goods trade deficit widened more than
expected in March. [] That came after Bank of
England Governor Mervyn King said weaker euro zone export
markets had increased growth risks for the British economy.
Bank of Tokyo-Mitsubishi UFJ suggested investors sell the
pound versus the U.S. dollar, targeting $1.3800.
"The downbeat assessment from Governor King yesterday, the
confirmation from the election outcome of an 'accelerated
reduction' in fiscal spending cuts and the continued turmoil in
the euro-zone -- the UK's main trading partner -- strengthens
our belief that the pound has further to fall against the
dollar," the firm wrote to clients.
MORE DOLLAR-POSTIIVE U.S. DATA
The dollar extended gains versus the euro after data showed
the number of U.S. workers filing new applications for
unemployment insurance fell last week, though by slightly less
than expected. See []
"The job market is continuing to improve, though at a
glacial pace," said Boris Schlossberg, director of currency
research at GFT in New York.
Analysts said the strong U.S. data added to the view that
U.S. interest rates will likely rise more quickly than those in
the euro zone or Japan.
The Australian dollar rose 0.7 percent <AUD=D4> to $0.8991,
buoyed by stronger-than-expected Australian employment data.
[]
But analysts said further gains could be limited as
Europe's debt crisis and worries about global economic strength
may conspire to keep Australian interest rates on hold.
"Despite the (Reserve Bank of Australia)'s increasing
concerns over the inflation outlook and a tightening in the
labor market, we think global factors dominate and expect the
RBA to stay on the sidelines for the next couple of months,"
said Su-Lin Ong, senior economist at RBC Capital.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York;
Editing by Diane Craft)
