FOREX-Focus on euro-zone debt worries trips up euro

* Euro down as worries resurface about Ireland

* Peripheral yield spreads widen; weak German data weighs

* Friday’s robust U.S. jobs numbers support dollar

(Updates prices, adds comment, detail, changes byline,

By Steven C. Johnson

NEW YORK, Nov 8 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) on Monday as
investors fretted anew about budget problems in Ireland and
some of the euro zone’s other weaker links.

Last week’s surprisingly strong U.S. jobs data also
prompted investors to buy the dollar, which had slipped to a
9-1/2 month low against the euro after the Federal Reserve said
it would buy $600 billion of Treasuries by mid-2011 to lower
interest rates and reinvigorate a sluggish economy.

The euro was last down 0.7 percent at $1.3940 (EUR=: ), and
traders said a break through support around $1.3860, its low so
far this month, could trigger a near-term move toward $1.37. It
also fell 0.8 percent to 113.13 yen (EURJPY=: ).

“We’re finally seeing the market turn its gaze away from
Fed easing and toward these ongoing problems in peripheral
Europe,” said Matthew Strauss, senior strategist at RBC Capital
Markets in Toronto.

“Even before the Fed meeting, spreads for Ireland, Greece,
Portugal were widening, and now that the Fed has indicated what
it will do, the market is starting to trade on these worries.”

Current market anxiety was focused mainly on Ireland.
Although the government is funded until early 2011, a local
newspaper report questioned its ability to cut spending next
year, casting doubt on future demand for government debt.

The cost of protecting Irish government debt against
default rose on Monday, as did equivalent insurance for Spain.

China said over the weekend it would help Portugal, another
euro zone country with strained public finances, cope with the
crisis but made no promises about buying Portuguese government
bonds. China has promised to buy Greek bonds in the future.

Weak German industrial output data also hurt the euro,
while a general move away from risk weakened the Australian
dollar, which fell 0.6 percent to $1.0097 (AUD=D4: ), off
Friday’s 28-year peak of $1.0183. The New Zealand dollar fell
1.2 percent to $0.7871 (NZD=D4: ).

The U.S. dollar was little changed at 81.15 yen (JPY=: ).


The dollar still faces an uphill climb against most major
currencies and will probably remain under pressure against
emerging market ones despite Monday’s gains, traders said.

While recent jobs data as well as reports on manufacturing
and service sector growth were surprisingly strong, analysts
said the economy has yet to show it can sustain such strength.

“We don’t see a massive sell-off of the euro nor do we
expect a mad sell-off of the dollar. The market is caught
between the impact of the Fed’s easing and euro-zone debt
problems,” said Daragh Maher, deputy head of FX research at
Credit Agricole CIB.

That will put the focus on other currencies. Among the
majors, Strauss said he likes the Canadian dollar, which has
struggled in the run-up to Fed easing. But he said the currency
stands to gain if the U.S. economy starts to gain traction and
the Bank of Canada is able to raise rates again in 2011.

The U.S. dollar was last up 0.4 percent at 1.0045 Canadian
dollars (CAD=: ).

Analysts also said traders may be cautious about chasing
the dollar much higher ahead of the Group of 20 nations summit
meeting in Seoul later this week, which may address global
economic imbalances.

The Fed’s decision to pump more money into the U.S. economy
irked developing and some developed countries who fear the
money will stoke inflation outside U.S. borders, where returns
on global investment are higher. Germany’s finance minister
called U.S. monetary policy “clueless.” [ID:nSGE6A706T]

But China appeared to temper its criticism over the
weekend, saying the Fed’s policy would help the world economy
by boosting U.S. growth. [ID:nTOE6A501U]

(Additional reporting by Jessica Mortimer in London;
Editing by Padraic Cassidy)

FOREX-Focus on euro-zone debt worries trips up euro