* Worries on Ireland, Portugal debt mount, weaken euro
* Dollar soars across the board as US yields climb
* New Zealand dollar tumbles after RBNZ comments (Updates prices, adds comment)
By Julie Haviv and Wanfeng Zhou
NEW YORK, Nov 9 (Reuters) - The U.S. dollar rallied broadly on Tuesday as debt risks in the euro zone's periphery weighed on the euro and as U.S. bond yields jumped.
The euro fell for a third straight session to a near two-week low as investors worried about Irish and Portuguese debt amid widening government bond spreads relative to Bunds.
The dollar gained as Treasury yields, which move inversely to price, rose as higher U.S. bond yields make dollar-denominated assets more attractive.
"I think it's led by the longer end of the Treasury curve right now. It's really squeezing out a lot of the dollar shorts, especially in the majors," said Mike Moran, senior currency strategist at Standard Chartered in New York.
"More broadly, I think the markets are slowly, but surely showing signs of Fed fatigue with all this talk of QE2. It's been the only game in town for the last month or two," he said. "We're starting to see this market shift back to this eurocentric focus."
The euro last changed hands down 1.1 percent at $1.3774 after hitting a session low of $1.3751 on trading platform EBS.
Traders said an earlier slide below the 76.4 percent retracement of a recent rally that peaked last week near $1.43 suggested it could fall as far as $1.3697 in the days ahead.
Some analysts said comments from New Zealand Reserve Bank Governor Alan Bollard also contributed to a sell-off in riskier currencies and boosted the dollar. Bollard said financial markets were interpreting NZ data more strongly than the central bank had done.
"The last buying in the U.S dollar seems to have been triggered by those Bollard comments out of New Zealand," said John McCarthy, director of foreign exchange trading at ING Capital Markets in New York.
"Those comments prompted selling of NZD, and other commodity currencies, and then sterling and then the euro. That tripped all the stop-losses on the way down for these currencies," he added.
The euro was down 0.3 percent at 112.59 yen while the dollar rose 0.7 percent to 81.74 yen. Traders said the next key resistance level for dollar/yen is 82, which is likely to attract offers from Japanese exporters.
Kathy Lien, director of research at GFT Forex in New York, said investors were booking profits on their short dollar positions, with moves exacerbated after the euro took out stops at $1.3860 and $1.3800 and sterling broke through $1.60.
"With the Fed having announced more easing and some people looking to take profits, it wouldn't be hard to see very choppy trading for the rest of the year," she said.
The cost of protecting government debt against default in Ireland and Portugal has risen in the past week, although it eased ahead of a Portuguese bond auction.
RISK SELLOFF
A Chinese credit rating agency Tuesday cut its rating on the United States, citing doubts about the U.S. ability to repay its debts, though the move had little impact on the dollar.
The major ratings agencies still give the United States the top rating of AAA, although some have warned about pressures from the rising debt burden on the rating's longer-term outlook. citing heavy selling from "a U.S. investment house," while the Australian dollar lost 1 percent at $1.0035, moving away from its recent 28-year high at $1.0183. The New Zealand dollar was down 1.3 percent at US$0.7772.
Low interest rates in developed countries have stoked demand for higher-yielding currencies and assets from fast-growing emerging market economies.
Emerging governments say this causes inflation in their economies, and some have tried to stem foreign money inflows. Analysts said that means investors should be wary of a sudden pullback in high-yielding emerging market assets.
Traders said some macro accounts and commodity trading advisers, who are short-term players, were already closing their long euro and short dollar forward and futures positions ahead of their book closing at the end of this month or next.
The dollar index was up 0.9 percent at 77.743, but Citigroup said charts are "highlighting the risk of a bounce, possibly as far as 79.31, the 200-day moving average."