FOREX-Euro extends fall on euro zone contagion fears

* Euro extends losses, hits two-month low vs dollar

* Focus on debt worries; Korea tensions prompt risk aversion

* Euro shrugs off record German Ifo; dlr index at 2-mth high

(Updates price, adds quote)

By Jessica Mortimer

LONDON, Nov 24 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) to a two-month low
against the dollar on Wednesday, extending losses on uncertainty
over Ireland’s plans to tackle its debts and fears the crisis
could spread to other peripheral euro zone countries.

Peripheral government bond yield spreads over Germany widened
and a North Korean statement in the wake of Tuesday’s artillery
clash that the South’s action was driving the peninsula to the
brink of war [ID:nTOE6AN07C] prompted investors to seek
safe-haven currencies.

These factors lifted the dollar to a two-month high against
a currency basket, while the troubles in the euro zone’s
periphery meant the euro quickly shrugged off a record high
German Ifo business climate index for November. [ID:nLDE6AN0KA]

Uncertainties remained over whether the crisis in Ireland
would be resolved, as the teetering government prepared to
release a four-year plan to save 15 billion euros as a condition
of an EU/IMF bailout. [ID:nLDE6AM25A] Standard and Poor’s cut
its sovereign rating on Ireland overnight. [ID:nSYU010701]

At the same time, worries intensified that the crisis could
spread to Portugal or even Spain.

“The Ifo survey was very strong but it did nothing to lift
the euro and the trend is clearly bearish into year-end,” said
Stephan Maier, currency strategist at Unicredit in Milan.

“Ireland will publish a four-year plan, but we don’t know
what will happen to the government afterwards with new elections
expected in January”.

The euro was down 0.2 percent at $1.3345 (EUR=: ), having hit
a two-month low of $1.3284 and broken below its 100-day moving
average — currently around $1.3297 — for the first time since
early September. It fell nearly two percent on Tuesday.

The euro may test $1.3232, the 61.8 percent retracement of
its August-November rally, before targeting $1.3000.

DOLLAR GAINS

The euro also fell to a two-month low against the yen
(EURJPY=R: ) and lost ground against the Swiss franc (EURCHF=: ),
with both currencies benefiting along with the dollar from
investors seeking safe haven-assets.

“The euro is very vulnerable due to the Irish crisis and
worries about whether Portugal will be next in line. These are
not things that will be solved today or tomorrow,” said Niels
Christensen, currency strategist at Nordea in Copenhagen.

The dollar index (Read more about the global trade. ) (.DXY: ) rose 0.15 percent to 79.798, having
hit a high of 79.995, its strongest in two months.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TAKE A LOOK-Korea situation [ID:nKOREA] Risks to watch on Korean peninsula [ID:nRISKKR] Fed pondered radical policy steps [ID:nFEDAHEAD] TAKE A LOOK-Europe debt problems [ID:nLDE68T0MG] Multimedia on euro zone crisis http://link.reuters.com/kar27p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Analysts said the euro zone worries eclipsed concerns about
tensions between North and South Korea, which most believed
would not escalate into something more serious.

The fact other perceived higher-risk currencies such as the
Australian (AUD=D4: ) and New Zealand dollar (NZD=D4: ) rose on the
day against the U.S. dollar supported this view.

“The fact that the Australian dollar is still up means this
is predominantly a story of euro zone-specific worries weighing
on euro crosses,” Unicredit’s Maier said.

The Australian dollar was up 0.4 percent from late U.S.
levels at $0.9765, rebounding from a four-week low of $0.9708.

Tuesday’s Federal Reserve minutes showing U.S. policymakers
considered more radical steps to boost the economy failed to
dent the dollar. [ID:nN23162201]

(Reporting by Jessica Mortimer)
([email protected]; Tel: +44207 542 7817, RM:
[email protected], editing by
Nigel Stephenson))

FOREX-Euro extends fall on euro zone contagion fears