* Euro down as worries resurface about Ireland
* Peripheral yield spreads widen; weak German data weighs
* Friday's robust U.S. jobs numbers support dollar
(Updates prices, adds comment, detail)
By Julie Haviv
NEW YORK, Nov 8 (Reuters) - The euro fell against the U.S.
dollar for a second straight session on Monday as budget
problems in Ireland and euro zone debt issues prompted
investors to seek safety in the greenback.
The euro, which fell Friday after a stronger-than-expected
U.S. jobs report, extended losses Monday on Europe's sovereign
debt concerns.
The dollar had slipped to a 9-1/2-month low against the
euro after the Federal Reserve last Wednesday said it would buy
$600 billion of Treasuries by mid-2011 to lower interest rates
and reinvigorate a sluggish economy.
The Fed's asset purchases are tantamount to printing more
money, which pushes down the value of the dollar. However, some
say this factor is already priced into the market and that has
allowed investors to focus on other issues.
The euro was last down 0.7 percent at $1.3935 <EUR=>, and
traders said a break through support around $1.3860, its low so
far this month, could trigger a near-term move toward $1.37. It
also fell 0.8 percent to 113.13 yen <EURJPY=>.
"Fears are escalating over sovereign debt issues in the
euro zone, and the euro breaking below $1.40 is a substantial
move," said Camilla Sutton, currency strategist at Scotia
Capital in Toronto, Canada.
"Having said that, I believe the euro's weakness is only a
temporary move and we will revert back to dollar weakness," she
said. "(Fed easing) will continue to put downward pressure on
the dollar into the year end as well as next year."
For now, though, markets were focused on debt problems in
Ireland. Although the government is funded until early 2011, an
Irish newspaper report questioned the government's ability to
cut spending next year, casting doubt on future demand for
Irish debt.
The cost of protecting Irish government debt against
default rose on Monday, as did equivalent insurance for Spain.
China said over the weekend it would help Portugal, another
euro zone country with strained public finances, cope with the
crisis but made no promises about buying Portuguese government
bonds. China has promised to buy Greek bonds in the future.
Weak German industrial output data also hurt the euro,
while a general move away from risk weakened the Australian
dollar, which fell 0.3 percent to $1.0132 <AUD=D4>, off
Friday's 28-year peak of $1.0183. The New Zealand dollar fell 1
percent to $0.7886 <NZD=D4>.
The U.S. dollar was little changed at 81.18 yen <JPY=>.
G20, IRELAND MAY ADD DRAMA
Analysts said European debt fears also provided an
opportunity to trim bets against the dollar, which remained at
an elevated level in the latest week. []
"The short dollar trade is overcrowded, so people may take
some profits to set themselves up to take another swipe at the
dollar later," said Michael Woolfolk, strategist at BNY Mellon.
Beyond short-covering, the dollar faces an uphill climb
against most major currencies and emerging market currencies,
traders said.
While recent jobs data was surprisingly strong, analysts
said the economy has yet to show it can sustain such strength.
There's also the matter of the Fed's promised bond buying
to the tune of $75 billion per month, which will keep interest
rates low and dull the dollar's global appeal.
Sutton expects the euro to reach $1.43 at year end.
The Fed's decision to pump more money into the U.S. economy
has certainly irked developing and some developed countries who
fear the money will stoke inflation outside U.S. borders.
Germany's finance minister called U.S. monetary policy
"clueless." For details, see []
The issue will probably feature at a Group of 20 meeting in
Seoul this week that may address global economic imbalances.
But if worries about euro zone debt issues mount, Woolfolk
said it could be a repeat of events last November, when debt
worries in Dubai and Greece sparked a safe-haven rush into
dollars.
"Last year, people closed their books early, took profits,
and bought dollars," he said. "This year, Ireland suggests
there is still smoke emanating from the European sovereign debt
crisis, and if it turns into a fire, it's quite possible that
the overbought euro will suffer again."
(Additional Reporting by Steven C. Johnson; Editing by Kenneth
Barry)
