FOREX-Euro stays soft near lows as debt crisis festers

* Euro below ichimoku cloud base, in downtrend

* Fears of debt crisis contagion undermine euro

* Liquidity thin due to U.S. Thanksgiving holiday

(Updates prices; adds quote)

By Anirban Nag

LONDON, Nov 25 (BestGrowthStock) – The euro came under renewed
pressure, dipping close to two-month lows against the dollar on
Thursday, as the euro zone debt crisis showed little signs of
abating and fears of contagion kept investors nervous.

Traders said Portugal and increasingly Spain were seen as
potentially in need of financial help while Ireland’s
belt-tightening measures came under fire for sticking to
optimistic growth assumptions.

Foreign exchange trading volumes were, however, light due to
the U.S. Thanksgiving holiday.

“Things are a bit sidelined due to the U.S. holiday but
there is still a lot of nervousness about euro zone peripheral
debt problems. So the euro remains a sell into rallies and not a
buy on dips,” said Paul Mackel, director of currency strategy at
HSBC.”

European clearing house LCH.Clearnet raised on Thursday the
margin requirements to trade Irish government debt, citing
widening spreads over triple-A euro zone benchmarks.
[ID:nLDE6AO0AB].

The cost of insuring Irish debt against default rose while
Spanish and Portuguese yields pushed higher. The rising spreads
in Spain have triggered speculation over whether the funds
available under a euro zone financial safety net would be
sufficient to help a large country if needed.

The euro was down 0.2 percent on the day at $1.3300, trading
below its 100-day moving average at $1.3303, having hit a
two-month low of $1.3284 (EUR=: ) on Wednesday. Traders said
option expiries at $1.3350 were likely to check any gains.

The next support is pegged at $1.3232, a 61.8 percent
retracement of the August to November rally, a break of which
could see the single currency test its 200-day moving average at
$1.3133.

The currency has fallen below support from the bottom of the
cloud on the daily ichimoku chart, which stood at $1.3371,
sending a major bearish signal. The last time it fell through
the cloud was December 2009, preceding a six-month-long decline.

The euro lost 0.12 percent against the yen, at 111.20 yen
(EURJPY=R: ). It fell to 110.32 yen on Wednesday, a level last
seen in mid-September.

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

Euro zone debt struggle http://link.reuters.com/dah65q

Multimedia on Euro zone crisis http://r.reuters.com/hus75h

EU bailout graphic http://link.reuters.com/fac76q

Euro zone debt graphic http://r.reuters.com/hyb65p

Interactive timeline http://link.reuters.com/nyx95q

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GROWING PAIN FOR EURO ZONE INVESTORS

Some traders said worries that private investors may have to
accept losses, or “haircuts”, in any euro zone sovereign debt
restructuring from 2013 — as proposed by Germany — could push
up the premium investors will ask for holding peripheral debt,
undermining the euro.

Still, European Central Bank Governing Council member Alex
Weber said on Wednesday that the euro would survive the debt
crisis and the euro zone financial safety net was enough to see
off a speculative attack. [ID:nLDE6AN28M].

Despite the latest turmoil, few expect the euro to fall to
the four-year low of $1.1876 marked in June in the wake of the
Greek debt crisis.

“Things are different,” said Jane Foley, senior currency
strategist at Rabobank. “We have QE2 which is dollar negative.
Also we are seeing Germany recover at a stronger than expected
pace and some in the ECB are still hawkish despite the
peripheral debt issues.”

The euro’s weakness helped the dollar index (Read more about the global trade. ) (.DXY: ) rise to a
fresh two-month high of 80.03. The dollar also gained 0.12
percent against the yen to 83.66 yen (JPY=: ) and hit a two-month
high against the Swiss franc (CHF=: ), helped in part by higher
U.S. Treasury yields.

The high-yielding Australian dollar (AUD=D4: ) was 0.34
percent lower at $0.9792, weighed down by position adjustments
and worries that China will tighten monetary policy.

FOREX-Euro stays soft near lows as debt crisis festers