FOREX-Euro slides for 2nd straight week as Ireland weighs

* Moody’s downgrades Ireland by five notches

* Euro eyes 200-day moving average at $1.3104

* Euro hits record low versus Swiss franc
(Updates prices, adds quotes, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 17 (BestGrowthStock) – The euro declined for a second
straight week against the dollar on Friday and may extend
losses after a multi-notch downgrade of Ireland’s credit rating
affirmed the severity of the euro zone debt crisis.

The euro slid to a two-week low around $1.3133, with
near-term support seen at $1.3104, its 200-day moving average
on electronic trading platform EBS. A break below could see the
currency retest the $1.30 level and drop toward its December
low of $1.2970, traders said.

The euro zone single currency’s slide accelerated after
Moody’s Investors Service slashed Ireland’s credit rating by
five notches to Baa1 with a negative outlook from Aa2 and
warned further downgrades could follow if Ireland was unable to
stabilize its debt situation. For more see [ID:nLDE6BG0EG].

The Moody’s news shattered optimism spurred by a
surprisingly firm German business confidence data.

“Moody’s reminded us that a strengthening German economy
contrasts sharply with health in Europe’s (peripheral) regions.
The ratings agency … caused something of a reality check for
the euro,’ said Andrew Wilkinson, senior market analyst at
Interactive Brokers in Greenwich, Connecticut.

In early afternoon trading, the euro last traded down 0.5
percent at $1.3169 after touching as low as $1.3133 (EUR=EBS: )
on trading platform EBS, the weakest level since Dec. 2.

Losses accelerated after automatic sell orders were
triggered below $1.32 and in the $1.3165-80 area, while thin
liquidity before the end of the year likely exacerbated the
decline. Leveraged accounts and a semi-official European name
were also seen dumping the currency, traders said.

On the week, the euro was down 0.2 percent, although for
the month of December, it was up 1.4 percent so far.

Euro zone graphic package:

Euro zone credit ratings:

In the options market, risk reversals, a measure of
currency sentiment, remained skewed toward euro puts, or bets
for a currency depreciation. On Friday, the one-month 25-delta
risk reversals were at -2.375 vols (EUR1MRR=GFI: ), unchanged
from the previous session.

To be fair, the option market’s view on the euro has
improved the last couple of sessions. However, risk reversals
on the euro are still way below the levels seen in mid-October,
when sentiment on the currency was its most positive.


European Union leaders on Friday agreed at a summit to try
to lengthen the maturities of new sovereign bond issues, and
confirmed that private investors will be involved in the future
euro zone rescue mechanism. [ID:nLDE6BG0O1]

They also agreed to set up a permanent crisis management
mechanism from mid-2013, but the news disappointed investors
who had hoped for more details and more active measures such as
expanding the European Financial Stability Facility or issuing
joint European sovereign bonds, so-called E-bonds.

“This is one of those half-full, half-empty days. There
were few expectations going into the summit that a
comprehensive solution to the near-term sovereign debt issues
facing the euro zone would be achieved,” said Steven Englander,
global head of FX strategy at CitiFX in New York.

He added that from post-meeting comments, it was clear that
the EU was not able to find common ground on how to deal with
the sovereign debt problems that are likely to emerge in the
next few months. “The euro’s … sell-off is probably a
response to the tepid comments emerging from the meeting.”

The euro hit a record low against the safe-haven Swiss
franc (EURCHF=EBS: ) around 1.2720. It was last at 1.2750 francs,
down 0.1 percent. The euro also fell to its lowest since 2006
versus the Swedish crown (EURSEK=D4: ) and last changed hands at
9.0116 krona, flat on the day.

The dollar was 0.2 percent weaker against the yen at 83.87
yen, having repeatedly been unable to break cleanly above 84.50
(JPY=: ) since late November despite higher yields that were said
to be spurred by improving U.S. economic data.
(Additional reporting by Wanfeng Zhou; Editing by James

FOREX-Euro slides for 2nd straight week as Ireland weighs