FOREX-Euro licks wounds, finds support for now

* Key retracement level offers euro support

* Market players turn back risk trades slightly

* Euro shrugs off downgrades of Ireland

By Hideyuki Sano

TOKYO, Nov 24 (BestGrowthStock) – The euro edged up from a two-month
low on Wednesday, finding support after a massive sell-off
sparked by the euro zone debt crisis and heightened tensions in
the Korean Peninsula.

The common currency ticked up on light buying back after
Europe’s inability to contain Ireland’s debt woes had knocked it
down 1.9 percent to as low as $1.3359 (EUR=: ) on electronic
platform EBS.

As the low represented an almost 38.2 percent retracement of
the euro’s rally this year to $1.4283 in early November from
$1.1876 in June, the euro may have found short-term support
there, said Sumino Kamei, a senior analyst at the Bank of
Tokyo-Mitsubishi UFJ.

The euro rose 0.3 percent to $1.3405 on the day, shrugging
off the news that Standard and Poor’s had downgraded its
sovereign rating on Ireland. [ID:nSYU010701]

“The fact that the euro didn’t fall further on the downgrade
suggests that the euro’s drop may be over at least for the short
term,” Kamei said.

Market players’ risk aversion also slightly eased as the
Korean won (KRW=KFTC: ) recovered from lows and regional shares
fared better than some investors had feared a day after North
Korea fired scores of artillery shells at a South Korean island.

That also helped the Australian dollar (AUD=D4: ) gain 0.6
percent from late U.S. levels to $0.9784, a halfway recovery from
Tuesday’s fall to a four-week low of $0.9708.

The dollar was little changed against the yen at 83.20 yen
(JPY=: ).

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TAKE A LOOK – Korea situation [ID:nKOREA]

Risks to watch on the Korean peninsula [ID:nRISKKR]

Fed pondered radical policy steps [ID:nFEDAHEAD]

TAKE A LOOK- Europe’s debt problems [nLDE68T0MG]

Multimedia on Euro Zone Crisis http://r.reuters.com/hus75h

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Traders said market liquidity is lighter than usual due to a
U.S. market holiday on Thursday, which means prices can be
exaggerated in either direction.

German Chancellor Angela Merkel said the euro was in an
“exceptionally serious” situation. Investors took aim at Spanish
government bonds on Tuesday, driving the premium over German
benchmarks to a euro lifetime high after Madrid was forced to pay
a high cost to sell short-term bills.

“Contagion from the Irish situation during the last few
months was largely limited to Greece and Portugal. Not any more,”
wrote Matthew Strauss, strategist at RBC Capital Markets, in a
note.

In addition, a deepening political crisis in Ireland could
derail the financial rescue to recapitalise the country’s banks
and fund its public finances.

Given these worries, some traders think a further fall in the
euro cannot be ruled out.

They say another key support for the euro is in the $1.3333
area, its August high. A break of that level could pave the way
for a retest of $1.3232, a 61.8 percent retracement of its
August-November rally, before $1.3000.
(Additional reporting by Ian Chua in Sydney; Editing by Michael
Watson)

FOREX-Euro licks wounds, finds support for now