FOREX-Euro hurt as peripheral debt jitters resurface

Published 11/08/2010, 05:25 AM
Updated 11/08/2010, 05:28 AM

* Euro down 0.8 percent vs dollar; down 1.0 percent vs yen

* Euro zone peripheral yield spreads widen

* Friday's robust U.S. jobs data support dollar

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By Tamawa Desai

LONDON, Nov 8 (Reuters) - The euro fell broadly on Monday on renewed concerns about euro zone peripheral debt while Friday's solid U.S. jobs data supported the dollar.

With the U.S. Federal Reserve's decision to launch more quantitative easing out of the way, euro zone debt problems seemed to have resurfaced on traders' radars.

"Now that QE by the Fed has become a fact, the market is paying attention to other factors that were overshadowed ahead of the Fed meeting," said Roberto Mialich, currency strategist at Unicredit in Milan.

"Also, stronger-than-expected U.S. payrolls sparked more position adjustments and profit-taking on the euro. I see a consolidation of the euro between $1.38 and $1.40 during the week."

He said traders may be cautious about chasing the dollar too high ahead of the Group of 20 summit meeting in Seoul later this weekend, which may address imbalances.

By 0906 GMT, the euro had fallen 0.8 percent to $1.3921. It earlier hit a session low of $1.3906 after falling through support of $1.3920, the 61.8 percent retracement of its Oct. 20 to Nov. 4 rally to a 10-month high of $1.4283.

More support was seen at $1.3835, the 76.4 percent retracement, with some eyeing a fall toward $1.3750, the currency having hit a late October low of $1.3756.

"Tensions have already resurfaced significantly with increasingly unsustainable market funding costs for Ireland and Portugal," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

The 10-year Irish bond yield spread over benchmark German debt widened on Monday, while investors eyed a government bond auction by Portugal this week.

The euro fell 1.1 percent against the yen to hit the day's low of 112.67 yen, according to Reuters data, taking it through reported stop-loss orders at 112.70/80 which the market had been

targeting, traders said. It also fell almost 0.5 percent against the pound to 86.26 pence.

Euro/yen selling weighed on other currencies against the yen.

The dollar fell 0.1 percent against the yen at 81.14 yen but remained above its 15-year low of 80.21 yen plumbed last week as the U.S. currency gained broadly.

But traders said they expected the dollar's upside to be limited as offers were lined up around 82 yen.

Japanese finance ministry data on Monday showed Tokyo stepped into the currency market to sell yen for dollars only once in September, on Sept. 15.

The dollar index, a measure of its performance against a basket of currencies, rose 0.6 percent to 76.990 as the greenback gained after U.S. jobs data blew past expectations on Friday.

The Australian dollar fell 0.5 percent to $1.0103, off a 28-year peak of $1.0183 scaled on Friday. The New Zealand dollar fell more than 1 percent to a low of $0.7868. (Editing by Catherine Evans)

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