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GLOBAL MARKETS-Irish debt woes hit euro; commodities ease

Published 11/11/2010, 09:41 PM
Updated 11/11/2010, 09:44 PM
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* Euro extends decline toward $1.36 on Irish fiscal crisis

* Commodities broadly retreat as U.S. dollar rebounds

* Copper bulls still see the rally continuing later

* Asian stocks shed up to 0.9 percent on profit taking

By Kevin Plumberg

HONG KONG, Nov 12 (Reuters) - The euro extended losses on Friday on fears Ireland may need a bailout just like Greece, while commodities eased as the U.S. dollar rose, hitting the pause button on a rally that pushed copper to record highs.

Traders slowed their selling of euros a bit after knocking the currency down 4 cents in the past week, squaring up before a statement about Ireland that may be issued by Britain and France later in the day.

Asian stock markets were mostly lower as traders took profits on gains this week heading into the weekend.

The possibility of a bailout for Ireland has significantly widened the difference of bond yields of high-risk European countries over those of Germany, and overshadowed a Group of 20 leaders' summit in Seoul, where a breakthrough on resolving global economic imbalances amid incongruent policies looked unattainable.

"The effects of euro zone peripheral bond concerns are spreading through euro zone markets and hitting risk appetite in the process. The euro is a clear casualty, having dropped further against the U.S. dollar and versus other currencies," Mitul Kotecha, global head of currency strategy with Credit Agricole CIB in Hong Kong.

The resurgence of fears about Europe's sovereign debt has added to a shift back into dollars and out of riskier assets.

The euro was down 0.3 percent against the U.S. dollar at $1.3625 after tumbling 0.9 percent on Thursday.

A close below the 200-week moving average of $1.3647 is a grim omen for the euro and paves the way to the next obstacle lower at $1.3558, the Sept. 30 low.

The dollar was down 0.2 percent against the yen, at 82.34 yen

The dollar has been rebounding ever since the Federal Reserve unveiled its $600 billion plan to buy Treasuries last week Wednesday. The dollar index, which measures the dollar's performance against a basket of other major currencies, has risen 3.2 percent since then to a 5-week high.

Commodities traders had barely blinked at the dollar's gains earlier in the week but prices succumbed to profit taking on Friday.

Analysts, however, were still looking for bullish moves in metals markets next year.

The rolling 30-day correlation between the U.S. dollar index and the Reuters-Jefferies index of 19 commodities has moved from -0.90 at the beginning of November to -0.22 on Thursday.

Three-month copper traded on the London Metal Exchange was down 1 percent to $8,732 a tonne after hitting a record high of $8,966 on Thursday.

Some analysts though still think copper prices could trek up to as high as $11,500 next year.

U.S. crude futures fell 1 percent to $86.93 a barrel though were still up 6.7 percent so far in November, having risen for the past two months.

Equities in Asia were mostly softer, with Hong Kong leading other markets lower.

The Hang Seng index opened 1.2 percent lower, with bank stocks weighing on the market.

Japan's Nikkei share average was down 0.9 percent but was still poised to post a 6.3 percent rise on the week.

Some stocks such as Canon Inc that led the Nikkei higher this week were the main drags on Friday, suggesting profit taking was an element weighing on the market.

The MSCI index of Asia Pacific stocks outside Japan was down 0.9 percent, with financials and telecom sectors under the most selling pressure. (Additional reporting by Reuters FX Analyst Krishna Kumar) (Editing by Kim Coghill)

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