* Dollar index hovers near seven-week high
* Market eyes developments in Irish debt crisis
* US consumer prices softer-than-expected (Updates prices, adds detail, changes byline, dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Nov 17 (Reuters) - The euro traded near a recent seven-week low against the dollar on Wednesday and looked set to slide further amid concerns over the lack of a clear solution to Ireland's debt crisis.
The euro earlier slid to a low of $1.3460 on trading platform EBS, not far from a seven-week low hit on Tuesday at $1.3446. Key support lies at $1.3436, the 50 percent retracement of the August to November rally with a break likely opening the way for a drop toward the low $1.30s, traders said.
Euro zone finance ministers have agreed 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.
The nervousness grew after European clearing house LCH. Clearnet doubled its margin requirement on Irish government bonds to 30 percent of net positions, citing higher Irish yields over German benchmarks.
"If we get a resolution to Ireland's problems, you could see the euro bounce," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "But the overall bias is to the downside, given uncertainty about not just Ireland but Portugal and Spain. Near-term, it has sold off a lot, but my best bet is it ends the year in the low $1.30s."
The euro
The euro briefly gained after a report showed U.S. consumer prices rose less than expected in October and the increase in the year-on-year core rate was the smallest on record. The data supported the Federal Reserve's decision to ease monetary policy. For details, see [ID:nN16142691]
Markets await the release of the Irish government budget due a week from this Friday before obtaining some clarity on the issue of Ireland's sovereign debt.
Irish Finance Minister Brian Lenihan said talks with the European Union, European Central Bank and International Monetary Fund would start on Thursday. [ID:nLDE6AG004] [ID:nLDE68T0MG]
"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.
"The euro is headed lower and thinning liquidity conditions
ahead of the year-end will exacerbate volatility," he said.
Description of EU safety net: [ID:nLDE65718H]
How Ireland might tap funds: [ID:nLDE6AE1S3]
Euro zone debt struggles: http://r.reuters.com/hyb65p
Multimedia coverage: http://r.reuters.com/hus75h
Traders said demand from European exporters helped support the euro, which was also lifted after the Wall Street Journal reported Boston Federal Reserve President Eric Rosengren as saying that the Fed would need to consider more stimulus action if the economy weakened.
LOUDER OBJECTIONS TO QE
The Fed official's 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. [ID:nN16134115]
The dollar stayed close to a six-week high of 83.60 yen
Against a basket of major currencies, the dollar <.DXY> was steady at 79.174, near Tuesday's seven-week high of 79.461.
Its correlation with 10-year U.S. yields
"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. (Additional reporting by Steven C. Johnson and Anirban Nag in London; Editing by Chizu Nomiyama)