FOREX-Euro falls as debt nerves return, dollar gains

                                
 * Dollar keeps bid tone after overnight gains
                                
 * Dollar rises to 1-mth high vs yen and Swiss franc
                                
 * Renewed euro zone jitters drags down euro
                                
 
                                
(updates prices, adds quote, detail)
                                
 By Anirban Nag
                                
 LONDON, Feb 11 (Reuters) - The euro fell on Friday following
a new bout of market jitters over the euro zone's sovereign debt
problems, while the dollar struck a one-month high against the
yen after data underscored recovery in the U.S. jobs market.
                                
 U.S. Treasury yields have spiked this month, shoring up the
dollar while improving data has supported the view that economic
recovery in the United States is on more durable ground.
                                
 Data on Thursday showed new applications for unemployment
benefits dropped to a 2-1/2 year low last week, consistent with
other indicators suggesting a strengthening labour market.
                                
 "The focus is on interest rates and the U.S. has lagged
behind most especially the euro zone," said Paul Robson,
currency strategist at RBS Global Banking.
                                
 "The improvement in the labour market bodes well for the
dollar while for the euro, there is a risk of disappointment as
peripheral debt problems return."
                                
 The dollar index <.DXY>, which measures the greenback's
performance against a basket of currencies, was up 0.5 percent
at 78.640. The dollar touched its highest level in a month at
83.60 yen <JPY=> to trade up 0.3 percent on the day.
                                
 Traders highlighted a chunky dollar/yen expiry for Friday's
New York cut at 84.00 yen, with more sizeable interest at the
same level also reported to come on Monday.
                                
 The dollar also benefited from safe-haven flows after
Egypt's President Hosni Mubarak refused to step down as had been
expected, keeping alive the risk of a possible showdown between
protestors and the military and more political chaos in the
Middle East. [ID:nLDE7192NZ].
                                
 
                                
 DEBT WORRIES DOG EURO
                                
 The euro remained under pressure against the dollar after
falling the previous day, weighed down by renewed jitters about
the euro zone debt crisis and waning expectations that the
European Central Bank will raise interest rates soon.
                                
 The euro <EUR=> shed 0.5 percent to trade at $1.3518,
falling below its 100-day moving average around $1.3541.
Technical analysts say a daily close below this level for the
first time since Jan. 17 could see further downside.
                                
 Next support was seen at this week's low just ahead of
$1.3500, where an option barrier was reportedly being protected
by strong bids.
                                
 Traders said the European Central Bank stepped in to buy
Portuguese bonds after yields on the country's debt hit euro-era
highs. [ID:nLDE7192AB]. The latest spike in yields has sparked
fresh concerns about funding costs in the euro zone periphery.
                                
 "Portugal faces a huge round of debt redemptions in April
and with current yields on Portuguese debt holding just below
post-euro creation highs it is not unreasonable to fear that
Portugal may need some sort of financial support this spring,"
said Jane Foley, senior currency strategist at Rabobank.
                                
 "The next few months therefore promise to be testing times
for the European Union and the euro."
                                
 Traders will also keep an eye on a meeting between
Bundesbank President Axel Weber and German Chancellor Angela
Merkel to discuss his future after the leaked disclosure of his
withdrawal from the ECB presidency race hit markets.
[ID:nBAT005987].
                                
 The rebounding dollar also made headway against the Swiss
franc, rising to a one-month high on demand from a Swiss bank,
with the franc staying pressured by weaker-than-expected Swiss
inflation data released on Thursday.
                                
 The Australian dollar <AUD=D4> lost 0.6 percent to $0.9979
<AUD=D4>, having come under pressure after Reserve Bank of
Australia Governor Glenn Stevens said it was reasonable to
expect rates to be on hold for some time. [ID:nL3E7DA2SC]
                                
 U.S. trade data for December is due at 1330 GMT with
economists in a Reuters survey forecasting a $40.4 billion
deficit versus a 38.31 billion deficit for November.
                                
 "Our economists expect that today's trade data will show
greater import strength (as indicated by strong domestic
spending in Q4 GDP) more than offsetting the expected gain in
exports and leading to a wider deficit," said RBC analysts in a
note.
 (Additional reporting by Neal Armstrong, Editing by Patrick
Graham/Toby Chopra)