* Euro below ichimoku cloud base, in downtrend
* Fears of debt crisis contagion undermine euro
* Liquidity thin due to U.S. Thanksgiving holiday
(Updates prices; adds quote)
By Anirban Nag
LONDON, Nov 25 (Reuters) - The euro stayed weak on Thursday,
dipping close to two-month lows against the dollar, as the euro
zone debt crisis showed little signs of abating and investors
remained nervous about the risk of contagion.
Traders said Portugal and increasingly Spain were seen as
potentially in need of financial help while Ireland's
belt-tightening measures came under fire for sticking to
optimistic growth assumptions.
Foreign exchange trading volumes were light, however, due to
the U.S. Thanksgiving holiday.
"Things are a bit sidelined due to the U.S. holiday but
there is still a lot of nervousness about euro zone peripheral
debt problems. So the euro remains a sell into rallies and not a
buy on dips," said Paul Mackel, director of currency strategy at
HSBC.
European clearing house LCH.Clearnet raised the
margin requirements to trade Irish government debt on Thursday,
citing widening spreads over triple-A euro zone benchmarks.
[]
The cost of insuring Irish debt against default rose while
Spanish and Portuguese yields pushed higher. [] Rising
Spanish yields have triggered speculation about whether funds
available under a euro zone financial safety net would be
sufficient to help such a large economy.
The euro <EUR=> edged up 0.1 percent on the day to $1.3340
after earlier hitting a low around $1.3287, just shy of the
previous day's two-month low of $1.3284. Traders said option
expiries at $1.3350 were likely to check any gains.
The next support is pegged at $1.3232, a 61.8 percent
retracement of the August to November rally. A break of that
support could test the euro's 200-day moving average at $1.3133.
"Contagion doesn't look to be spreading at the moment and
the market is in a range for now, with no new news," said Lauren
Rosborough, currency strategist at Westpac.
She said she expected the euro would fall towards $1.3080,
the 50 percent retracement of the rally from the May low below
$1.19 to the November high above $1.42, but said some
consolidation may be needed before the next push lower.
The European Commission said on Thursday there were no
discussions on more countries seeking aid. []
The euro has fallen below support from the bottom of the
cloud on the daily ichimoku chart, which stood at $1.3371,
sending a major bearish signal. The last time it fell through
the cloud was in December 2009, preceding a six-month-long
decline.
The euro was steady against the yen at 111.39 yen
<EURJPY=R>. It fell to 110.32 yen on Wednesday, a level last
seen in mid-September.
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TAKE A LOOK- Europe's debt problems []
Euro zone debt struggle http://link.reuters.com/dah65q
Multimedia on Euro zone crisis http://r.reuters.com/hus75h
EU bailout graphic http://link.reuters.com/fac76q
Euro zone debt graphic http://r.reuters.com/hyb65p
Interactive timeline http://link.reuters.com/nyx95q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
GROWING PAIN FOR EURO ZONE INVESTORS
The euro's weakness helped the dollar index <.DXY> rise to a
fresh two-month high of 80.003. The dollar also hit a two-month
high above parity against the Swiss franc <CHF=>, helped in part
by higher U.S. Treasury yields.
Some traders said worries that private investors may have to
accept losses, or "haircuts", in any euro zone sovereign debt
restructuring from 2013 -- as proposed by Germany -- could push
up the premium investors demand for holding peripheral debt,
undermining the euro.
Still, European Central Bank Governing Council member Alex
Weber said on Wednesday the euro would survive the debt crisis
and the euro zone financial safety net was enough to see off a
speculative attack. []
The high-yielding Australian dollar <AUD=D4> was 0.15
percent lower at $0.9808, weighed down by position adjustments
and worries that China will tighten monetary policy.
(Editing by Susan Fenton)
