* Euro hits fresh 18-month low below $1.25
* Concern austerity plans will weaken growth in spotlight
* Dollar hits one-year high vs basket on safe-haven demand
(Adds quote, detail, updates prices)
By Wanfeng Zhou
NEW YORK, May 14 (Reuters) - The euro declined to a
18-month low against the dollar on Friday on growing worries
that deep government spending cuts in the euro zone would
stifle a fragile recovery.
After climbing close to $1.31 following last weekend's
agreement of a $1 trillion emergency rescue package, the euro
has come under renewed pressure as focus shifted to the impact
on growth from fiscal tightening in countries like Greece,
Spain and Portugal.
Expectations have grown that the euro zone's fragile
economies will force the European Central Bank, which started
buying the region's government bonds this week, to keep
interest rates low for a prolonged period of time.
"There's continued pessimism on the euro," said Samarjit
Shankar, managing director of global FX strategy at BNY Mellon
in Boston. "There are still a lot of doubts about how European
policy makers will be able to successfully maintain the
regional growth story."
In mid-morning trading in New York, the euro was down 0.7
percent at $1.2439. It had earlier fallen as low as $1.2421
<EUR=> on electronic trading platform EBS, the lowest since
November, 2008.
Traders said aggressive selling by macro hedge funds and
large option-related stop-loss orders at $1.2499 and $1.2450
accelerated the currency's slide, adding that the next key
level to watch is the October 2008 low around $1.2330.
The euro's slide set it on track for a loss of about 2.5
percent this week. It has fallen more than 13 percent against
the U.S. dollar this year, making it the biggest loser among
major currencies.
"Interest rate differentials moved against the euro as the
ECB started buying bonds and markets have priced out interest
rate hikes. That's driving the euro lower," said Marcus
Hettinger, global FX strategist at Credit Suisse in Zurich.
UBS lowered its forecast for the euro/dollar to $1.15 by
the end of this year and $1.10 by the end of 2011.
The single euro zone currency also lost 1.6 percent to
114.21 yen <EURJPY=>, while it held steady at 1.4015 Swiss
francs <EURCHF=>, near Thursday's all-time low, with investors
wary of potential Swiss National Bank intervention.
Against the yen, the dollar fell 0.9 percent to 91.84 yen
<JPY=>.
The ICE Futures U.S. dollar index, which tracks the value
of the greenback versus a basket of major currencies, hit a
one-year high at 85.941 <.DXY>.
The dollar and yen both benefited from safe-haven demand as
euro zone debt woes heightened uncertainty about the global
economy and overshadowed positive news on the U.S. consumer
front.
U.S. consumer sentiment edged up in early May from April,
while retail sales rose more than expected in April. Separate
data showed a continuing expansion of industrial activity. For
more, see []
(Editing by Theodore d'Afflisio)
