* Euro falls through $1.35 on Irish, Greek debt woes
* US dollar index climbs to seven-week high
* Aussie, Canada dollars fall on risk aversion
(Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, Nov 16 (Reuters) - The euro fell to a seven-week
low against the dollar on Tuesday amid heightened worries about
a deepening euro zone debt crisis, with losses accelerating
after breaking key support levels.
The safe-haven dollar climbed to a seven-week peak versus a
basket of currencies as sharply lower stock and commodities
prices hit risk appetite and prompted investors to unwind bets
against the U.S. currency built up in recent months.
The euro dipped below $1.3450 after taking out options
barriers and significant support in the $1.3550-60 area. The
single currency will likely stay weak in the near term as
investors focus on debt troubles in Ireland and other European
peripheral economies.
European officials are weighing a rescue package of 80
billion to 100 billion euros for Ireland and a separate,
smaller bailout for its banking sector, the Wall Street Journal
reported on Tuesday. For details, see []
Ireland has come under intense pressure over its debt
crunch in recent weeks, with a top European Union official
saying the future of the 27-country union was at stake.
"What's driving the euro is just all the sovereign risk out
of Europe," said Jack Iles, a portfolio manager at MFC Global
Investment Management in Boston. "That's driving sentiment
across the board for risk assets and that probably will not go
away in the next 48 hours."
Adding to worries was news that Greece will most probably
miss its fiscal targets this year and next and that Austria has
not yet submitted its contribution to the aid package for
Greece for December. An official from Austria said it is not
seeking to block aid for Greece. []
[]
The euro hit a session low of $1.3446 on trading platform
EBS <EUR=EBS>, its weakest since Sept. 28, before pulling back
to trade at $1.3484, off 0.7 percent. Upside is seen limited
with dealers noting real money selling and offers at $1.35.
Support levels include $1.3463, a 50 percent retracement of
the euro's September-November rally, and $1.3364, a 38.2
percent retracement of its June-November rally.
Traders also noted key support at $1.3334, the euro's high
set in early August before markets began to speculate about the
Federal Reserve's second-round of bond buying.
European finance ministers are meeting on Tuesday and
Wednesday and will try to reach a deal to provide aid to
Ireland. Some analysts said the euro may see a reprieve on news
of an agreement as it would ease concern that Irish debt woes
could spread to other economies such as Portugal and Spain.
But Kathy Lien, director of research at GFT in New York,
said an agreement on a bailout would be bearish for the euro.
"On the day news of a Greek bailout emerged, the euro fell
about 100 pips and went on to fall further in the weeks that
followed. I don't see any solid support in the euro until
$1.34," she said.
RISKIER CURRENCIES FALL
Data from the Commodity Futures Trading Commission showed
currency speculators cut long euro positions significantly in
the latest week as they continued to trim bets against the
dollar. []
Traders said leveraged funds had flipped long euro/dollar
positions, and the dollar will see further strength as
investors book profits on their bets against the dollar before
year-end.
The euro gained in earlier trading after a survey by the
ZEW think-tank showed German analyst and investor sentiment
rose more than expected in November. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EU safety net description []
More on how Ireland might tap funds []
Graphics: Debt distribution http://link.reuters.com/rak65q
Bank exposure to Irish debt http://r.reuters.com/fez84q
Euro zone struggles with debt http://r.reuters.com/hyb65p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar index, which measures the dollar against a
basket of currencies <.DXY>, rose as high as 79.461, its
strongest since Sept. 28.
The dollar also hit a six-week high of 83.60 yen <JPY=EBS>,
buoyed by a recent rise in U.S. bond yields <US10YT=RR> It
broke through resistance on daily Ichimoku charts at 83.17 yen,
the bottom of the cloud. The top of the cloud was at 84.13.
Sterling <GBP=D4> fell 1.1 percent after Bank of England
Governor Mervyn King said the central bank could do further
quantitative easing if necessary. []
A broad pullback in risk appetite hit higher-yielding,
commodity-linked currencies. The U.S. dollar jumped 1.3 percent
against the Canadian dollar <CAD=>, while the Australian dollar
<AUD=D4> fell to a more than two-week low amid fears China will
tighten monetary policy.
