FOREX-Debt worries push euro to multi-week lows

* Euro hits 10-week low vs dollar, yen, Swiss franc, pound

* Euro breaks below barriers at $1.30 before recovering

* Contagion fears weigh as peripheral bond spreads widen

By Jessica Mortimer

LONDON, Nov 30 (BestGrowthStock) – The euro slid to its lowest in
more than 10 weeks against the dollar, yen, Swiss franc and
sterling on Tuesday as a weekend rescue deal for Ireland failed
to quell worries that other euro zone countries may need help.

The euro fell (Read more about the trembling euro. ) 1 percent against the dollar, breaking through
reportedly strong options barriers to take it below $1.30.

A lack of confidence that the Ireland deal would contain the
debt crisis caused the premiums investors demand to hold Spanish
and Italian sovereign bonds over German debt to jump to euro
lifetime highs. Yields on Portuguese, Irish and Belgian bonds
also rose. [GVD/EUR]

“At the moment there is no confidence that any of these
(peripheral) countries can effectively fund,” said Adrian
Schmidt, currency strategist at Lloyds.

“Until we get some sort of market appetite for peripheral
debt these worries will continue to weigh on the euro,” he said,
adding he believed the currency could fall as low as $1.25.

The euro (EUR=: ) fell to $1.2979 on EBS trading systems, its
lowest since Sept. 16, before modestly recovery to $1.3028, with
traders saying model funds and other investors bought at lower

It stayed well below its 200-day moving average, currently
around $1.3127, having closed beneath it on Monday to signal a
bearish trend ahead.

Traders said the ease with which the euro had broken key
levels in recent days reflected the extent of negative sentiment
towards the single currency, which has lost around 9 percent
against the dollar since its peak earlier this month.

Risk reversals showed a sharp increase in the premium
charged for buying euro puts — bets on the currency falling —
over euro calls, with the one-month euro/dollar 25-delta
(EUR1MRR=ICAP: ) trading at around 2.45 for euro puts. This is up
from 1.95 on Monday and nearing highs hit in June close to 3.0.

The dollar gained broadly, hitting a two-month high of
81.346 against a currency basket (.DXY: ), lifted by safe-haven
flows and recent evidence of an improving U.S. economy.


The latest positioning data from the Commodity Futures
Trading Commission showed speculators going net short on the
euro for the first time since Sept. 14 [IMM/FX], but traders saw
scope for more adjustment.

“With euro positioning nowhere near any extreme there is
more scope for downside over the coming sessions,” a
London-based trader said.

“Flows retained a negative euro bias with macro funds
selling euro cash and positioning to the downside via options.”


Euro zone debt timeline:

Take a Look on Irish bailout: [ID:nLDE68T0MG]

Euro zone crisis :

Graphic on debt problems:

Euro correlation with Greek and Irish bond spreads


The single currency slid to 1.2972 Swiss francs (EURCHF=R: ),
108.90 yen (EURJPY=R: ), and 83.66 pence against sterling
(EURGBP=D4: ), all more than 10-week lows.

The higher-yielding Australian dollar (AUD=D4: ) also fell to
an eight-week low of $0.9566.

FOREX-Debt worries push euro to multi-week lows