* Euro pares gains as U.S. bond and stock markets fall
* EU leaders reassure bondholders but fears persist
* China rate-hike talk hurts Aussie
(Updates prices, adds quotes)
By Julie Haviv
NEW YORK, Nov 12 (Reuters) - The euro pared gains against
the dollar on Friday, remaining near a six-week low, as
roiling financial markets outweighed a move by European
leaders to reassure nervous bondholders about the value of
their holdings.
While the dollar benefited from the market turmoil, the
Federal Reserve's quantitative easing will likely keep
pressure on the greenback. Reuters reported that the Fed is
unlikely to stop short of the full $600 billion bond-buying
amount. []
The euro was given an early reprieve as European leaders
reiterated to bondholders they would not be forced to take
losses in the event of a new euro-zone bailout, but a deluge
of separate factors curtailed its upward momentum.
[]
Irish debt concerns and the potential for Chinese rate
hikes to fight off inflation knocked stocks, bonds and
commodity prices lower as investors booked profits heading
into the weekend. []
"All of these joined forces to take the wind out of the
euro's sails," said John Doyle, foreign exchange strategist at
Tempus Consulting in Washington D.C.
"What we have overall is general risk aversion and the
dollar has gained on the tail of that," he said.
The euro responded to steady buying by macro funds as the
cost of insuring Irish, Spanish and Portuguese debt against
default fell.
"All of the factors that weighed on the euro this week
could carry over into next week, with the potential debt
problems in Ireland and direction of equities likely at the
forefront," Doyle said. "We could very well see a $1.35 by the
end of the month."
The euro <EUR=EBS> rose to a session high of $1.3777, well
off the session low of $1.3573 on EBS. It last traded at
$1.3693, up 0.3 percent <EUR=>.
At the session low, the euro/dollar broke through the 38.2
percent Fibonacci retracement level, at 1.3631, of the move
from the August low to the November peak. The 50 percent
retracement comes at 1.3431, with the 61.8 percent at 1.3232.
Speculation of a rescue package for Ireland added to the
euro's allure earlier in the global session though the Irish
Finance Ministry said market talk of a bailout package with
the EU was untrue.
Two-thirds of economists and bond strategists polled by
Reuters on Thursday said Ireland would seek international
rescue funds before the end of next year. []
The euro has shed 2.5 percent this week, the biggest
weekly loss in three months, as long positions built before
the Fed's bond-buying decision last week have been unwound
heading into the year-end book-closing season.
G-20 AND CHINA
Analysts said the communique from Group of 20 leaders
meeting in Seoul was mildly positive as it agreed to tackle
tensions that have threatened "currency wars" and trade
protectionism. [].
The G-20 seemed to give the green light to emerging
countries with flexible currency regimes to impose capital
controls.
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G20 Take a Look []
Multimedia PDFs>>
G20 battle lines: http://r.reuters.com/jux34q
The Fed's gamble: http://r.reuters.com/cyh73q
Ireland's bailout challenge: http://r.reuters.com/wuv48p
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The Australian dollar <AUD=D4>, a favorite among investors
choosing to buy into growth, fell as low as $0.9825, its
lowest since Nov. 1. It was last down 1.2 percent at $0.9861.
Media reports suggested China was planning to limit
foreigners investing in its already speculative real estate
sector while South Korea was planning capital controls.
The dollar fell 0.2 percent to 82.36 yen <JPY=>, with
Japanese exporters selling into the dollar's recent bounce.
The euro fell to a two-month low against the yen
<EURJPY=EBS> in early trading, hitting 111.04 on EBS, but was
last flat at 112.72.
(Additional reporting by Nick Olivari in New York; Editing by
Jan Paschal)
