FOREX-Euro hits 9 1/2-mth low vs dollar on Greek debt woes

* Euro hits 9-1/2 month low of $1.3435, then pares losses

* Greece's biggest public sector union to strike Mar. 16

* Report of possible Greek econ plan lifts euro from lows

(Adds comment, details)

By Neal Armstrong

LONDON, March 2 (Reuters) -The euro dropped to a 9 1/2-month low against the dollar on Tuesday as fresh unrest over anticipated Greek austerity measures heaped further selling pressure on the single European currency.

Greece's biggest public sector union called on Tuesday for a 24-hour strike on Mar. 16 to protest against expected plans by Athens to cut its ballooning debts. [ID:nATH005239] Taxi drivers marched on Tuesday in protest at a tax clampdown.

"The strike announcement will make it more difficult for the Greek government to meet its proposed spending cuts. This has added to the uncertainty surrounding the country's finances and the euro has come under further pressure," said Rabobank currency strategist Jeremy Stretch.

Worries over Greece's ability to finance its debts have been weighing for weeks on the euro, which has fallen more than 10 percent from its November highs.

The euro fell as low as $1.3435 according to Reuters data, its weakest since mid-May 2009, before pulling back to $1.3549 by 1209 GMT.

The euro was lifted from its trough by a narrowing in the yield spread between 10-year Greek and German government bonds, which some traders said was prompted by a media report that Athens may announce new austerity plans on Wednesday.

The report followed Greek Prime Minister George Papandreou's announcement late on Monday that the cabinet would meet on Wednesday to take decisions about the economy. [ID:nLDE6202II]

"The market is giving (the euro) the benefit of the doubt that Greece can put together an austerity package," said Kenneth Broux, market economist at Lloyds TSB Corporate Markets.

He said the euro may get an initial boost when the plan is announced but the view that Athens will likely have a tough time implementing austerity plans would keep the euro weak, adding that a fall to the $1.32 region was possible.

DOLLAR SUPPORTED

Technical analysts said the next support level to be tested the euro was $1.3405, the 61.8 percent retracement of the rally from the 2008 low of $1.2328 to the 2009 high at $1.5144.

The euro was slightly lower against the yen at 120.60 yen, having fallen as low as 119.78 yen and nearing a one-year low of 119.60 yen hit last week.

The Japanese currency was broadly unchanged versus the greenback at 89.01 yen.

The dollar <.DXY> was little changed against a currency basket at 80.702, hovering within reach of a nine-month high of 81.342 hit last month.

"The general dollar-positive tone remains in place against the pound and the euro in particular," said Westpac currency strategist Lauren Rosborough.

Stronger-than-expected U.S. GDP data on Friday has reinforced expectations that U.S. interest rates would rise quicker than those in the euro zone and the UK.

The pound was 0.1 percent lower against the dollar at $1.4975, smarting after worries over a potential hung parliament in the UK had knocked sterling to a 10-month low of $1.4781 on Monday.

The Australian dollar rose 0.4 percent to $0.9042, extending gains after the Reserve Bank of Australia hiked interest rates to 4.0 percent and flagged further increases. [ID:nSGE62101U]

The Canadian dollar rose, pushing the U.S. dollar 0.7 percent lower to a six-week trough of C$1.0341 as the Canadian currency extended gains on the back of strong economic growth figures announced on Monday.

The Bank of Canada will make an interest rate announcement later in the day. It is widely seen holding rates near zero, but focus will be on the need for the central bank to acknowledge that the economy doing better than expected.

(Additional reporting by Naomi Tajitsu; Editing by Nigel Stephenson/Ruth Pitchford)