* Euro at 3-week low vs dollar as debt concerns weigh
* EUR/USD breaks below key technical support
* Implied volatility on one-month euro/dollar falls (Updates prices, adds quotes)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 14 (Reuters) - The euro fell to a three-week low against the dollar on Monday and was viewed as vulnerable to extended losses after a European finance ministers' meeting provided little clarity about concrete solutions to the region's fiscal problems.
The single currency underperformed the dollar for a third straight day, dropping below a crucial 100-day moving average at $1.3543 on electronic platform EBS. Further losses below $1.3500 could take the euro down to support at $1.3360, the 50 percent retracement of the January to February rally.
"The euro remains below $1.35 as its vulnerabilities were again exposed," said David Watt, senior fixed income and currency strategist at RBC Capital Markets in Toronto.
European finance ministers met in Brussels on Monday to discuss ways of strengthening the 440 billion euro bailout fund. But Germany remains reluctant to bolster the facility without euro zone commitments on closer economic coordination. Germany's support as Europe's largest economy is essential to any deal. For details, see [ID:nLDE71D0JU]
In addition, news about troubled German bank WestLB also added to pressure on the euro. WestLB [WDLG.UL] is preparing to suggest its own break-up to the European Commission on Tuesday to win approval for billions in state aid, three people familiar with the matter said. [ID:nLDE71D1FT]
In late trading, the euro
Greg Michalowski, chief FX analyst at New York-based FX online broker FXDD, said the euro has a bearish bias if it is trading below the 100-day moving average at $1.3543.
Traders, however, said losses in the euro have been limited by central bank buying seeking to diversify out of U.S. dollars.
The dollar was up around 0.2 percent on the day against a currency basket to 78.598 <.DXY>, trading above its 100-day moving average for the first time in four weeks.
The dollar fell against the yen for the first time in nine
days, dropping 0.2 percent to 83.30 yen
The increase in sovereign debt risk has pushed 10-year government bond yields higher for Ireland, Greece, Portugal and Spain, with the spread to German 10-year government bond yields widening.
That said, overall euro sentiment has improved
significantly since December. The 25 delta risk reversals, a
measure of risk sentiment, on front-end euro/dollar
Meanwhile, implied volatility on the one-month euro/dollar
contract
European bond auctions were also a key focus for investors on Monday.
Italy sold 5.2 billion euros of five- and 30-year bonds in a sale that went smoothly despite renewed concerns about peripheral countries' debt loads after Portugal's syndicated deal struggled in the secondary market last week.[ID:nLDE71D0I8]
Portuguese 10-year bonds were the hardest hit on Monday in
the euro zone, with benchmark debt yields in Portugal
"We think the odds that Portugal will have to seek an assistance package are increasing," said Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York.
Spanish bond auctions will be a focus for euro zone investors on Thursday, while investors await details of a European debt rescue fund next month.
Focus on the euro zone's concerns has overshadowed
President Barack Obama's 2012 budget plan, which aims to slash
the U.S. deficit by $1.1 trillion over 10 years. For full
coverage of 2012 budget proposal click on [ID:nN11152338]
To visit Reuters Insider's "United States of Distress"
microsite, please double-click: http://link.reuters.com/jyg97r
(Additional reporting by Julie Haviv; Editing by Dan Grebler)