* Euro falls to 4-month low vs dlr, technical outlook bleak
* Portugal under pressure to accept financial aid package
* Bond auctions in Spain, Italy, Portugal under scrutiny
(Adds detail, updates prices)
By Neal Armstrong
LONDON, Jan 10 (Reuters) - The euro fell to a four-month low
against the dollar on Monday as worries about Europe's debt
crisis mounted, after a source said Portugal was under growing
pressure to accept EU/IMF aid.
A senior euro zone source told Reuters on Sunday pressure
was growing on Portugal from Germany and France to seek
financial help from the European Union and International
Monetary Fund to prevent the debt crisis spreading.
[]
German Finance Minister Wolfgang Schaeuble said on Monday
Germany was not forcing any country to seek aid. []
The single currency fell to lows not seen since
mid-September at $1.2860 <EUR=> on trading platform EBS, after
stops around $1.2900 and $1.2870 were triggered. It recovered to
$1.2891 in European trade, down 0.2 percent on the day, with
traders reporting option barriers at $1.2850.
It also fell 0.2 percent against the Swiss franc to 1.2467
francs <EURCHF=>. It hit a record low of 1.2398 in December.
Market players said the euro looked vulnerable due to
worries about the sustainability of public finances in Portugal,
Spain and Italy, which are all due to tap the bond market for
funds this week.
"There is a realistic possibility that Portugal will not
manage to generate the funds required for 2011 without foreign
aid and this is a negative for the euro," said You-Na Park,
currency strategist at Commerzbank.
"But even if Portugal does seek a bailout, the market may
well turn on Spain as the next candidate. We still see downside
risks for the euro from here," she added.
EURO TECHNICAL OUTLOOK BLEAK
Technical analysts said the outlook for the single currency
was bleak after the break below its 200-day moving average last
week at $1.3073. The euro's next support was the 61.8 percent
retracement of its rally from last to November, around $1.2794.
"Last week's close below the 200-day moving average was
particularly bearish. There is now a risk that the euro could
revisit the low $1.20s area," said Kathleen Brooks, research
director at FOREX.com.
"But moves down are likely to be slowed by Asian reserve
diversification," she said.
China voiced support for European government bonds on Friday
as crucial investment choices for its foreign exchange reserves.
[]
The euro has fallen from a peak of $1.3435 on Jan. 4, as
investors sold peripheral euro zone bonds ahead of new debt
supply this week. []. Portugal, Spain and Italy
seek to raise up to an estimated 11.25 billion euros from
investors at bond auctions this week.
Portugal will draw the most intense scrutiny when it tries
to sell up to 1.25 billion euros of five- and 10-year debt on
Wednesday. []
Analysts said that if investors judge that the price Lisbon
needs to pay to get funds is too high to sustain borrowing in
the long term, Portuguese bonds may sell off quickly and force
the country to seek emergency EU and IMF funds.
The dollar index, which measures its performance against a
basket of major currencies, rose 0.24 percent to 81.230, having
risen to a high of 81.273--its highest since early December.
But the dollar's upside looked limited after Friday's U.S.
employment report on showed a rise of 103,000 jobs in November,
well short of economists' expectation for 175,000.
The unemployment rate at 9.4 percent was still very high, as
fewer people looked for work.
That suggested the Fed would not be in a hurry to wind down
its programme of buying assets to stimulate the economy, despite
recent upbeat data that pointed to a more self-sustaining
recovery.
