* Euro falls to 5-week low vs dlr on Ireland debt problems
* Technical analysts looking for daily close under $1.3690
* G20 meeting under way, market sets expectations low (Adds detail, comment, updates prices, changes byline)
By Julie Haviv
NEW YORK, Nov 11 (Reuters) - Growing uncertainty about Ireland's ability to repay its debts sent the euro to its lowest level in five weeks on Thursday, overshadowing attempts at a Group of 20 summit to ease tensions over currency and trade policies.
Ireland's issues have swiftly moved to the forefront of currency concerns after taking a backseat to U.S. Federal Reserve policy for several weeks. Yields on 10-year Irish bonds rose well above 8 percent to a record high over comparable German debt, the euro zone's standard.
Investors are worried Ireland would not be able to cut spending as planned and may require a bailout, with bond holders forced to absorb losses.
"The market has gone back to focusing on Europe rather than the U.S., where rates are currently very low," said Greg Anderson, G10 FX strategist at Citigroup in New York. "It has become a game of 'Which currency do you dislike the most?' and right now that currency is the euro."
The Fed's Treasury bond purchase program, announced last week, is widely viewed as detrimental to the value of the dollar and a boon for higher-yielding, riskier currencies. That trade, however, may have run its course and Europe's debt issues have caused investors to shun higher-risk assets in favor of the greenback.
The euro fell as low as $1.3637, a five-week trough, and
was last down 1 percent at $1.3656
"While we think the euro looks vulnerable over the near-term, by the end of the year it will likely head higher," Anderson said.
Some traders said solvency fears were spreading, with a rise in Spanish bond yields increasing market anxiety.
"If Spain is coming under the microscope, we could have a larger breakdown in the euro given the size of the Spanish economy," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.
Dolan said $1.3520 may emerge as the next target, while other traders said demand for downside options, particularly one-month $1.3200 strikes, would keep pressure on the euro.
Meanwhile, costs for protecting Irish, Portuguese and Spanish sovereign bonds from default were at or near records.
INCREASED DOLLAR APPEAL
The spike in Irish yields and decline in German yields as investors seek shelter in bunds has come as U.S. yields have turned higher, lifted partly by a string of strong U.S economic data, including October's employment report.
That makes holding the dollar more attractive and helped it
rise above 82 yen this week for the first time since early
October. It was last up 0.2 percent at 82.43 yen
The Fed said it would buy $600 billion of Treasuries by mid-2011 to lower U.S. interest rates and boost slow growth, though a U.S. think tank report on Thursday said the central bank could buy fewer bonds if the economy improves. For more, see: [ID:nWEN2912]
Trading was lighter than usual, with some markets in the United States and Canada closed for holidays. The U.S. bond market was closed in observance of Veterans Day.
G20 MEETS IN SOUTH KOREA
Europe's woes diverted attention from a G20 summit in South Korea. Discussion was expected to include exchange rate policies and global economic imbalances, though few investors expect a sweeping agreement. [ID:nN10121378].
G20 Take a Look: [ID:nN09105095]
G20 battle lines: http://r.reuters.com/jux34q
Basel III:reshaping the rules: http://r.reuters.com/zys68p
The Fed's big gamble: http://r.reuters.com/cyh73q
After China stimulus package: http://r.reuters.com/puj74q
Live blog:
http://live.reuters.com/uk/Event/G20_Summit_in_Seoul
Much of the disagreement on currencies focuses on the United States and China, with the former eager to see the Chinese yuan appreciate at a faster pace.
Citigroup's Anderson said the G20 meeting is too big of a group to reach any substantive agreement.'
"There are just too many diverse interests in play, so we do not expect any major developments to come out of it," he said. (Additional reporting by Steven C. Johnson in New York and Neal Armstrong in London; Editing by Dan Grebler)