* Dollar index hovers near seven-week high
* Market eyes developments in Irish debt crisis
* High yielders vulnerable as risky trades unwound
(Updates price; adds comments)
By Anirban Nag
LONDON, Nov 17 (Reuters) - The euro traded near seven-week lows versus the dollar on Wednesday, hobbled by the lack of a clear solution to Ireland's debt crisis, while high-yielding currencies consolidated, vulnerable to unwinding of risk trades.
Euro zone finance ministers agreed on Tuesday to lay the groundwork for bailing out Ireland's banking sector with the IMF, but Dublin has yet to decide whether to request the aid.
That provided little comfort to the market with the cost of insuring against default by Ireland jumping while differences within the euro zone on whether more support for struggling economies should be provided also limiting euro gains.
This uncertainty and risks that debt problems could spread to Portugal and other weak economies supported the greenback, with the dollar index hovering just below a seven-week high.
Irish Finance Minister Brian Lenihan said talks with the European Union, European Central Bank and International Monetary Fund would start on Thursday.
"Investors are looking at all this euro zone uncertainty and think discretion is the better part of valour," said Simon Derrick, head of currency research at Bank of New York Mellon.
"They are of the view: after Ireland, will it be Portugal? The euro is headed lower and thinning liquidity conditions ahead of the year end will exacerbate volatility."
The euro edged up to $1.3508, off a seven-week trough of $1.3446 hit on trading platform EBS on Tuesday. It has lost nearly 5 percent this month as investors cut long positions as peripheral debt worries mounted.
A convincing break of $1.3446 and then at $1.3436, the 50 percent retracement of the August to November rally, could pave the way for the euro to test $1.3334, the peak of the June-August rise.
Traders said European exporters were buying the single currency, providing some support to the euro. It also drew some support after the Wall Street Journal reported Boston Federal Reserve President Eric Rosengren as saying the Fed would need to consider more stimulus action if the economy weakened.
U.S. consumer price index data for October is due later in the session and while economists expect a 0.3 percent rise over the previous month, a downside surprise could lend support to the view that monetary stimulus was needed to help the economy.
LOUDER OBJECTIONS TO QE
The Fed officials' comments came against a backdrop of objections to the central bank's stimulus moves that have become increasingly strident since November elections swept Republicans to control in the U.S. House of Representatives.
The dollar stayed close to of a six-week high of 83.60 yen yen struck on Tuesday, and last traded at 83.36 yen, up 0.11 percent on the day.
Against a basket of major currencies, the dollar eased to 79.10, off Tuesday's seven-week high of 79.461, having broken the 78.90/79.10 resistance zone.
Its correlation with 10-year U.S. yields has grown stronger and analysts at RBC Capital Markets said that if 10-year yields rise towards the next resistance levels of 3.06 percent and 3.13 percent, the dollar index could gain further.
"We are certainly seeing the dollar being underpinned by safe-haven inflows, given the nervousness amongst investors about Ireland and fears about tightening in Asia could lead to a slowdown for commodities," said Jane Foley, senior currency strategist at Rabobank.
The Australian dollar, a commodity-linked currency, traded at $0.9795, up 0.4 percent on the day and consolidating after posting sharp losses earlier this week. It fell to a low of $0.9725 on Tuesday, a trough not seen since Oct. 29.
It showed little impact from China vowing to tame inflation and intervene in prices.