* Euro falls through $1.35 on Irish, Greek debt woes
* US dollar index climbs to seven-week high
* Aussie, Canada dollars fall on risk aversion (Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, Nov 16 (Reuters) - The euro fell to a seven-week low against the dollar on Tuesday amid heightened worries about a deepening euro zone debt crisis, with losses accelerating after breaking key support levels.
The safe-haven dollar climbed to a seven-week peak versus a basket of currencies as sharply lower stock and commodities prices hit risk appetite and prompted investors to unwind bets against the U.S. currency built up in recent months.
The euro dipped below $1.3450 after taking out options barriers and significant support in the $1.3550-60 area. The single currency will likely stay weak in the near term as investors focus on debt troubles in Ireland and other European peripheral economies.
European officials are weighing a rescue package of 80 billion to 100 billion euros for Ireland and a separate, smaller bailout for its banking sector, the Wall Street Journal reported on Tuesday. For details, see [ID:nLDE6AE2AI]
Ireland has come under intense pressure over its debt crunch in recent weeks, with a top European Union official saying the future of the 27-country union was at stake.
"What's driving the euro is just all the sovereign risk out of Europe," said Jack Iles, a portfolio manager at MFC Global Investment Management in Boston. "That's driving sentiment across the board for risk assets and that probably will not go away in the next 48 hours."
Adding to worries was news that Greece will most probably miss its fiscal targets this year and next and that Austria has not yet submitted its contribution to the aid package for Greece for December. An official from Austria said it is not seeking to block aid for Greece. [ID:nLDE6AF1R6] [ID:nLDE6AF1Z8]
The euro hit a session low of $1.3446 on trading platform
EBS
Support levels include $1.3463, a 50 percent retracement of the euro's September-November rally, and $1.3364, a 38.2 percent retracement of its June-November rally.
Traders also noted key support at $1.3334, the euro's high set in early August before markets began to speculate about the Federal Reserve's second-round of bond buying.
European finance ministers are meeting on Tuesday and Wednesday and will try to reach a deal to provide aid to Ireland. Some analysts said the euro may see a reprieve on news of an agreement as it would ease concern that Irish debt woes could spread to other economies such as Portugal and Spain.
But Kathy Lien, director of research at GFT in New York, said an agreement on a bailout would be bearish for the euro. "On the day news of a Greek bailout emerged, the euro fell about 100 pips and went on to fall further in the weeks that followed. I don't see any solid support in the euro until $1.34," she said.
RISKIER CURRENCIES FALL
Data from the Commodity Futures Trading Commission showed currency speculators cut long euro positions significantly in the latest week as they continued to trim bets against the dollar. [IMM/FX]
Traders said leveraged funds had flipped long euro/dollar positions, and the dollar will see further strength as investors book profits on their bets against the dollar before year-end.
The euro gained in earlier trading after a survey by the
ZEW think-tank showed German analyst and investor sentiment
rose more than expected in November. [ID:nDEP003399]
EU safety net description [ID:nLDE65718H]
More on how Ireland might tap funds [ID:nLDE6AE1S3]
Graphics: Debt distribution http://link.reuters.com/rak65q
Bank exposure to Irish debt http://r.reuters.com/fez84q
Euro zone struggles with debt http://r.reuters.com/hyb65p
The dollar index, which measures the dollar against a basket of currencies <.DXY>, rose as high as 79.461, its strongest since Sept. 28.
The dollar also hit a six-week high of 83.60 yen
Sterling
A broad pullback in risk appetite hit higher-yielding,
commodity-linked currencies. The U.S. dollar jumped 1.3 percent
against the Canadian dollar