FOREX-Euro at 2-month low, focus moves to Portugal, Spain

* Euro slips below $1.3200 to lowest in 2 months

* Market looking beyond Ireland package

* Aussie stays weak on worry over China tightening fallout

By Charlotte Cooper and Hideyuki Sano

TOKYO, Nov 29 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) to its lowest in two
months against the dollar on Monday as the market looked past a
rescue package for Ireland to other euro zone economies and a
euro zone crisis resolution mechanism.

EU finance ministers endorsed an 85 billion euro ($115
billion) loan package to help Dublin cover bad bank debts and
bridge a huge budget deficit, and approved outlines of a
permanent crisis-resolution system which could make private bond
holders share the burden of restructuring sovereign debt bought
after 2013. [ID:nLDE6AR0MC]

A key point for investors is whether the EU has done enough
to stem fears from spilling over to other euro zone members such
as Portugal, a problem left unresolved after Greece was bailed
out earlier this year.

“There was an end of uncertainty at least about the timing
and the size of the (Irish) bailout and people bought the euro,
but it was temporary,” said Masafumi Yamamoto, chief FX
strategist Japan at Barclays Capital in Tokyo.

“The focus is moving on to Spain and Portugal.”

Many traders think the European Financial Stability Facility,
a joint EU-IMF fund created in May, may not have enough funds to
support Spain, whose economy is the world’s ninth-largest and
nearly twice the size of those of Portugal, Ireland and Greece
combined. [ID:nLDE6AR09R]

“I don’t think anything has changed over the weekend … The
problem is that if Spain does need a rescue, they cannot fund it
with the current facility,” said a trader at a European bank.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Timeline on eurozone crisis: Multimedia coverage: Graphic on sovereign debt woes: How serious is Korea peninsula situation? [ID:nTOE6AR01H] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>


“There’s absolutely no indication that the agreed package for
Ireland is going to soothe those concerns stemming from the
Iberian peninsula,” said Philip Shaw, chief economist at

The euro fell (Read more about the trembling euro. ) as far as $1.3182 (EUR=: ) before bouncing back
to $1.3235. It fell through its 100-day moving average on Friday,
a bearish signal, and the next target is its 200-day moving
average currently at $1.3131. A break of that level could push
the euro back to around $1.27, said the European bank trader.

Against the yen, the euro stood at 111.00 yen (EURJPY=R: ),
down from 111.34 yen late on Friday.

Ireland said the emergency loans would run for an average of
7.5 years, and EU Monetary Affairs Commissioner Olli Rehn said
the final interest rate would likely be about 6 percent, slightly
lower than some had expected. [ID:nWEA2085]

Still, investors were unsure if Irish opposition parties that
are expected to take control of the government in the coming
months would back the scheme.

Another source of uncertainty is a lack of details on a
Franco-German proposal to make private bondholders share the
burden of losses on sovereign debt restructuring.

European Central Bank policymaker Christian Noyer, speaking
in Tokyo on Monday, brushed aside the possibility of investors
taking losses or “haircurts” on the value of sovereign bonds. But
the market showed a muted response. [ID:nTOE6AS00Y]

Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, said
the euro could continue to fall until around Christmas. He said
it was likely to find support around $1.2988, a 76.2 percent
retracement of its rise from August to early November.

“The whole thing has a strong sense of deja vu after the
Greek debt crisis in May. People talked about the euro’s demise
and so on at that time too. But the truth is that Europe now has
some sort of safety net in place,” he said.

The dollar reached its highest level in two months against a
basket of major currencies at 80.652 (.DXY: ).

The U.S. currency briefly ticked to a two-month high of 84.20
yen (JPY=: ), holding firm after a gain on Friday, but quickly
retreated to 84.11 yen.

It has breached its 100-day moving average at 84.09 yen but
needs a clean break there to push on to the next resistance level
around 84.40 yen, the high of late September, and psychological
resistance at 85.00.

The Australian dollar slipped to its lowest since early
October, dropping as far as $0.9584 (AUD=D4: ).

“Some investors are cutting long positions in the Aussie,
which has been their core position in recent months, as they see
a yellow light flashing on the Asian growth engine after China’s
tightening,” said the European bank trader.

China has been taking a raft of tightening steps in recent
weeks, including hiking banks’ reserve requirements, to cope with
soaring inflation.

Investors are keeping a close eye on developments on the
Korean peninsula, where China has called for emergency talks to
resolve the crisis between North and South Korea.
(Additional reporting by Ian Chua in Sydney and Reuters FX
analysts Krishna Kumar in Sydney and Rick Lloyd in Singapore;
Editing by Michael Watson)

FOREX-Euro at 2-month low, focus moves to Portugal, Spain