FOREX-Euro slides to 2-month low vs dollar, focus on $1.30

* Euro falls below 200-day moving average around $1.3130

* Euro/dlr volatilities up as market senses further falls

* Lukewarm response to Italian debt auction
(Updates prices, adds comment, changes byline, dateline;
previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 29 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) to two-month
lows against the U.S. dollar on Monday as a rescue package for
Ireland failed to soothe a market worried about the next
possible debt-stricken euro zone economy to implode.

Analysts expect further losses in the euro given the
uncertainty surrounding the fiscal outlook of the region’s
peripheral countries. The next key target is $1.30 after the
euro fell (Read more about the trembling euro. ) below the 200-day moving average around $1.3130.

European Union finance ministers endorsed an 85 billion
euro rescue package for Dublin and approved outlines of a
permanent crisis-resolution system that could make private
bondholders share the burden of restructuring sovereign debt
after 2013. [ID:nLDE6AR0MC]

Sentiment remained fragile with a sale of Italian bonds
meeting lukewarm demand and highlighting investors’ unease
about euro-zone debt. [ID:nTAR001551]

“The markets remain concerned about prospects in the euro
zone,” said Matthew Strauss, senior currency strategist at RBC
Capital in Toronto. “If Spain were to apply for a bailout, that
would require a bigger amount because of the size of its
economy. And this continues to weigh on the euro.”

The euro fell (Read more about the trembling euro. ) was last at $1.3094 down 1.45 percent on the
day. Investors took out option barriers at $1.31, traders

Euro/dollar implied volatilities extended a recent rise,
reflecting nervousness about the single currency. One-month
volatilities (EUR1MO=: ) rose to 15.00 percent from 13.60 on

The one-month 25-delta (EUR1MRR=ICAP: ) was trading around
2.0 for euro puts versus 1.85 on Friday.

The cost of insuring Portuguese and Spanish debt against
default rose to a record high on Monday. [ID:nLDE6AS114]

Many traders said the European Financial Stability
Facility, a joint EU-International Monetary Fund reserve
created in May, may not have enough funds to support Spain if
it needs help. [ID:nLDE6AR09R]

Euro zone crisis timeline:
Multimedia coverage:
Graphic on sovereign debt woes:



Ireland said the emergency loans would run for an average
of 7.5 years, with an interest rate of around 6 percent. Many
analysts say markets are still likely to turn on Portugal and
Spain, seen as the euro zone’s next weakest links.

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.

“That suggests the broader fiscal backdrop in the euro zone
could remain troubled for longer, particularly if other, larger
countries also require bailout programs, and as well raises
troubling questions about moral hazard,” wrote Bob Lynch,
currency strategist at HSBC in New York.

Analysts said the market would be watching whether European
Central Bank policymakers, meeting on Thursday, would remove
some of the emergency measures put in place earlier this year.

The euro’s losses helped the dollar index (Read more about the global trade. ) (.DXY: ) to its
highest in two months, above 81.004, up 0.8 percent on the day.
The dollar also hit a two-month high of 84.34 yen (JPY=: ), up
0.4 percent.
(Additional reporting by Anirban Nag in London; Editing by
Padraic Cassidy)

FOREX-Euro slides to 2-month low vs dollar, focus on $1.30