* Euro down vs dlr, 1st time in 4 days on euro zone woes
* FX Concept's Taylor sees euro to parity vs dollar
* Euro zone finance ministers meet (Updates prices, adds quotes, details)
By Julie Haviv
NEW YORK, Dec 6 (Reuters) - The euro fell on Monday as traders took profits from a three-day rally on signs of division over how to contain the euro zone's fiscal crisis.
The euro's weak performance came as euro zone finance ministers met under pressure to boost the size of a rescue fund to stop a debt crisis from spreading.
The euro zone should have a bigger rescue fund for member states in trouble, and the European Central Bank should boost its bond buying to prevent the sovereign debt crisis from derailing economic recovery, an International Monetary Fund report obtained by Reuters said.
"There is a growing discord among euro zone finance ministers, and that is weighing heavily on the euro today," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
"This discord is prompting a resumption of the bearish trend surrounding the euro," he said. "If this discord continues, I fully expect the euro to be tested at $129.86 this week."
Germany's rebuff to the IMF call reinforced this discord.
In early afternoon in New York the euro was down 0.90 percent at $1.3294 but above the session's low of $1.3245, according to Reuters data.
Peripheral government bond yields widened sharply against those of Germany after four days of narrowing last week.
The United States is headed for a new recession, said John Taylor, chairman and chief investment officer of FX Concepts, and that should boost the U.S. dollar and weigh on commodity prices.
He added that the euro zone is in a difficult financial situation, with Spain likely to be an issue in 2011. That could push the euro to parity versus the dollar by next year, Taylor said at the Reuters Global Investment Summit on Monday.
The euro also fell to a session low against the yen on electronic trading platform EBS midway through the New York session on Monday. The euro was last down 1.1 percent against the yen at 109.69 yen after going as low as 109.63 yen.
With the euro resuming its decline, the dollar index was up 0.5 percent at 79.74, close to its 100-day moving average of 80.04.
Meanwhile, market talk that fueled the euro rally late last week was confirmed on Monday when the ECB said it had bought 1.965 billion euros worth of bonds in the week to Dec. 3 compared with 1.348 billion the previous week. It was the biggest weekly total since the end of June and takes the program's overall tally to 69 billion euros.
BERNANKE AND QE2
Federal Chairman Ben Bernanke said on CBS-TV's "60 minutes" Sunday it is possible U.S. monetary policymakers could increase the $600 billion in asset purchases announced at the last Fed meeting.
Analysts and traders said Bernanke's comments on QE were not too bearish given Friday's below-forecast jobs data.
Interactive Brokers' Wilkinson said Bernanke's comments assuaged fears over inflation and has helped buoyed the dollar.
"Bernanke made clear that he has no interest in letting inflation budge beyond 2 percent and that soothed fears," he said.
Euro/dollar risk reversals showed the premium demanded to buy euro puts over calls rising again as the recovery in the spot euro above $1.34 looked to have run its course. The 25-delta 1-month risk reversal traded above 2.0 on Monday after falling to around 1.85 on Friday.
The dollar was up 0.08 percent to 82.70 yen, below its session high of 82.98, but climbing off Friday's three-week low of 82.52 yen and keeping well above the Ichimoku 'cloud' bottom around 81.70 yen.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York and Anirban Nag in London; Editing by Kenneth Barry)