* Euro hits 5-month low vs dollar, sterling
* Euro/dollar breaks through key 200-day moving average
* Dollar boosted after U.S. Senate election
(Adds comment, details, updates prices)
By Naomi Tajitsu
LONDON, Jan 20 (Reuters) - The euro hit five-month lows against the dollar and sterling on Wednesday as the single European currency's decisive break under a key support level against its U.S. counterpart prompted widespread selling.
The dollar rallied broadly, boosted as investors reckoned the Massachusetts election of a Republican to the U.S. Senate was dollar positive as it might see the government rein in spending and reduce the fiscal deficit.
Commodity currencies fell on reports that some Chinese banks have been instructed to curb lending -- a move that some in the market said may slow China's economic recovery and cut its demand for commodities.
Analysts said the election of a Republican on Tuesday to a Senate seat long occupied by a Democrat may pave the way for legislative compromises and ultimately spending cuts, which may lower the U.S. deficit in the future.
Paul Mackel, director of currency strategy at HSBC in London, said this view contrasted with the situation in the euro zone, where Greece's ballooning debts continue to raise concerns about the fiscal health of some members of the 16-country bloc.
"Euro/dollar will stay under selling pressure at least in the near term as the market entertains the idea that it may have to reassess the broader tone of the U.S. fiscal situation after the election," he said.
"If the market is considering whether the U.S. fiscal outlook is looking better, while it's still looking ropy in the euro zone, that's giving conviction to be short on the euro."
By 1119 GMT, the euro traded 1 percent lower on the day at $1.4160, having hit a low of $1.4149, its weakest since mid-August.
EURO FALLS THROUGH 200-DMA
The single currency broke through its 200-day moving average around $1.4295, which had been considered a key support level. Selling accelerated after stop-loss orders were triggered under that level, traders said.
The last time the euro broke below that moving average was in August 2008, when it tumbled more than 10 cents within a month.
The euro has fallen around 1 percent against the dollar so far this week, and some in the market said the pace of its losses may slow in the near term.
"We could see a continued slide in the euro, but we do acknowledge that the market is becoming overstretched (in selling the currency)," said Carl Hammer, currency strategist at SEB in Stockholm.
The euro fell as low as 86.96 pence against sterling, its weakest since late August.
Analysts say concerns about Greece and other European states' ability to deal with swelling budget deficits, combined with lacklustre growth, may continue to weigh on the euro.
Broad dollar gains helped push its value against a currency basket to 78.111, a near two-week high.
The New Zealand dollar fell 2.5 percent to a three-week low of $0.7201 after data showing easing inflation pressures cooled speculation the central bank may soon raise interest rates. It fell 2.3 percent against the yen
Along with the Australian dollar, the New Zealand currency suffered after Chinese media and bank sources said banking authorities had instructed major banks to curb lending over the rest of this month.
The Australian dollar fell 1.3 percent against its U.S. counterpart and the yen.
The yen gained broadly, pushing the dollar down 0.3 percent to 90.87 yen.