* Moody's downgrades Ireland by five notches
* Euro eyes 200-day moving average at $1.3104
* Euro hits record low versus Swiss franc (Updates prices, adds quotes, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 17 (Reuters) - The euro declined for a second straight week against the dollar on Friday and may extend losses after a multi-notch downgrade of Ireland's credit rating affirmed the severity of the euro zone debt crisis.
The euro slid to a two-week low around $1.3133, with near-term support seen at $1.3104, its 200-day moving average on electronic trading platform EBS. A break below could see the currency retest the $1.30 level and drop toward its December low of $1.2970, traders said.
The euro zone single currency's slide accelerated after Moody's Investors Service slashed Ireland's credit rating by five notches to Baa1 with a negative outlook from Aa2 and warned further downgrades could follow if Ireland was unable to stabilize its debt situation.
The Moody's news shattered optimism spurred by a surprisingly firm German business confidence data.
"Moody's reminded us that a strengthening German economy contrasts sharply with health in Europe's (peripheral) regions. The ratings agency ... caused something of a reality check for the euro,' said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
In early afternoon trading, the euro last traded down 0.5 percent at $1.3169 after touching as low as $1.3133 on trading platform EBS, the weakest level since Dec. 2.
Losses accelerated after automatic sell orders were triggered below $1.32 and in the $1.3165-80 area, while thin liquidity before the end of the year likely exacerbated the decline. Leveraged accounts and a semi-official European name were also seen dumping the currency, traders said.
On the week, the euro was down 0.2 percent, although for the month of December, it was up 1.4 percent so far.
In the options market, risk reversals, a measure of currency sentiment, remained skewed toward euro puts, or bets for a currency depreciation. On Friday, the one-month 25-delta risk reversals were at -2.375 vols, unchanged from the previous session.
To be fair, the option market's view on the euro has improved the last couple of sessions. However, risk reversals on the euro are still way below the levels seen in mid-October, when sentiment on the currency was its most positive.
NO POSITIVE SURPRISES AT EU SUMMIT
European Union leaders on Friday agreed at a summit to try to lengthen the maturities of new sovereign bond issues, and confirmed that private investors will be involved in the future euro zone rescue mechanism.
They also agreed to set up a permanent crisis management mechanism from mid-2013, but the news disappointed investors who had hoped for more details and more active measures such as expanding the European Financial Stability Facility or issuing joint European sovereign bonds, so-called E-bonds.
"This is one of those half-full, half-empty days. There were few expectations going into the summit that a comprehensive solution to the near-term sovereign debt issues facing the euro zone would be achieved," said Steven Englander, global head of FX strategy at CitiFX in New York.
He added that from post-meeting comments, it was clear that the EU was not able to find common ground on how to deal with the sovereign debt problems that are likely to emerge in the next few months. "The euro's ... sell-off is probably a response to the tepid comments emerging from the meeting."
The euro hit a record low against the safe-haven Swiss franc around 1.2720. It was last at 1.2750 francs, down 0.1 percent. The euro also fell to its lowest since 2006 versus the Swedish crown and last changed hands at 9.0116 krona, flat on the day.
The dollar was 0.2 percent weaker against the yen at 83.87 yen, having repeatedly been unable to break cleanly above 84.50 since late November despite higher yields that were said to be spurred by improving U.S. economic data. (Additional reporting by Wanfeng Zhou; Editing by James Dalgleish)