* Moody's cuts Greece's credit rating
* Eurostat shows bigger Greece budget deficit, euro down
* Greek CDS at new high, Greek/German yield spread widens
* Generally upbeat U.S. data boosts dollar vs euro (Adds comments, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 22 (Reuters) - The euro plunged to its lowest level since May against the U.S. dollar on Thursday after Moody's cut Greece's sovereign rating by a notch and placed the rating on review for a further possible downgrade.
In a statement, Moody's cited the risk that the debt-strapped country may end up paying a lot more for its borrowing than initially thought.
"With the Moody's downgrade, the only surprise is they did not cut more," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York. "No way is Greece still a single grade credit. It is clear the pressures on Greece continues, manifested in bond...(and) FX markets."
In reaction, two key measures of perceived sovereign risk soared.
The Greek/German 10-year government bond yield spread rose to 600 basis points, its widest in 12 years while the cost of insuring Greek debt from default surged to record highs.
Following the Moody's news, the euro dropped to $1.3260, a near one-year low, according to Reuters data. In midday trading, it was last at $1.3292, down 0.7 percent on the day. Against the pound, the euro fell as low as 86.30 pence, its weakest since late January.
The Moody's ratings cut overshadowed news earlier in the session that Greece may get a short-term bridge loan from European countries, according to a Greek government source.
"There's a lot of concern that these types of things (bridge loan) are just band-aids that do little other than buy time," said Mike Malpede, currency analyst at Easy Forex in Chicago. "I don't think people see short-term fixes as much of a help."
The euro had already been under pressure in the European session after the European Union's statistics office said on Thursday it has revised Greece's 2009 budget deficit to 13.6 percent of gross domestic product from 12.7 percent.
Greece needs to raise about 10 billion euros by end-May to refinance debt, make interest payments and fund the deficit.
While Greece is still on pace to meet its 2010 deficit reduction target, the upward revision means the country may have to accelerate its deficit-cutting efforts over the next two years, said the European Commission, the EU's executive body.
In the United States, data showing a fall in jobless claims, a rise in producer prices in March, and an increase in existing U.S. home sales further pushed the euro lower against the dollar. The reports reinforced the view that the U.S. economy is on a steady path to recovery.
"The dollar is getting a nice benefit from U.S. data today, both jobless claims...and...housing data. That's helping to contrast with the debt worries in the euro zone, resulting a a broadly stronger dollar," said Joe Manimbo, currency trader, Travelex Global Business Payments in Washington.
The ICE Futures' dollar index, a gauge of the greenback's value against six major currencies, rose 0.6 percent to 81.364.
The dollar, however, was down 0.1 percent against the yen at 93.00 yen, pulling away from the day's high of 93.34 yen. Offers were seen above 93.40 yen, traders said.
The yen has benefited from media reports the Bank of Japan may upgrade its inflation and growth forecasts in a semi-annual report next week.