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FOREX-Euro falls on Irish bank bailout bill concern

Published 09/30/2010, 04:40 AM
Updated 09/30/2010, 04:44 AM

* Euro falls vs dlr, yen after Ireland prices bank bailout

* Dollar/yen falls on Japan exporters and stops

* Quarter-, month-end flows dominate

* Negative dollar sentiment stays intact

(Updates prices; changes byline, dateline pvs TOKYO)

By Jessica Mortimer

LONDON, Sept 30 (Reuters) - The euro fell versus the dollar and yen on Thursday, hurt by Ireland putting the price of bailing out Anglo Irish Bank at 34 billion euros and as investors booked profits ahead of month and quarter-end.

The yen rose broadly on the last day of Japan's fiscal half-year. Traders cited sporadic dollar selling against the yen by Japanese exporters, stop-loss selling, and dollar selling by hedge funds.

This pushed the dollar just shy of its lowest level versus the yen since Japan stepped in to curb yen gains two weeks ago, heightening anxiety they may step in again.

Traders also booked some profit on the euro, after it hit a five-month high versus the dollar on Wednesday and ahead of U.S. manufacturing data on Friday.

A one-notch downgrade by Moody's of Spain's credit ratings was another euro negative, but analysts said the broad trend of dollar weakness due to concerns the Federal Reserve may embark on more easing measures remained intact.

Reports of Asian central banks buying dips in euro/dollar also helped to cap losses for the single currency, traders said.

"Ahead of month- and quarter-end people are wanting to book some profit," said Niels Christensen, currency strategist at Nordea in Copenhagen.

"The mix of news is giving the dollar a bit of a breather... But there is no indication that the recent dollar slide has come to an end and people are still happy to put on short dollar positions".

Over the last quarter, the dollar index -- which hit an eight-month low on Thursday -- has fallen more than 8 percent, the euro gained around 11 percent versus the U.S. currency and the Australian dollar around 15 percent.

At 0758 GMT, the euro was down 0.1 percent at $1.3612, not far from a five-month high against the dollar of $1.3647 hit on trading platform EBS on Wednesday.

The euro slid 0.6 percent against the yen to 113.27 yen, with traders saying losses accelerated after stop-loss offers were triggered below 113.50 yen.

Ireland's central bank put a 34 billion euro price on bailing out stricken Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an extra 3 billion euros by year-end.

EYES ON JAPANESE AUTHORITIES

Against the yen, the dollar was down 0.4 percent at 83.33 yen. It hit a 15-year low of 82.87 hit on trading platform EBS earlier this month, prompting Japan to intervene.

The dollar index was steady at 78.704.

"We're in the intervention risk zone because the BOJ were intervening in and around these levels when they first came into the market," said Sue Trinh, a senior currency strategist at RBC in Hong Kong.

Traders said intervention wariness would rise if the dollar fell below 83.00.

"The current levels are a bit in-between, but I think they may step in if the dollar breaks 83.50 and then drops to the upper half of the 82-83 yen range," said a trader for a Japanese bank, adding that intervention might be effective at this stage, since cross/yen pairs were holding up relatively well.

The market is also waiting to see if the Bank of Japan takes further easing steps to support the economy and counter the impact of the rising yen at its Oct. 4-5 policy meeting.

(Additional reporting by Charlotte Cooper and Masayuki Kitano in Tokyo)

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