* Euro retains selling bias, falls nearly 1 pct vs dollar
* Concern more EU countries may follow German shorting ban
* Aussie dollar hit on risk aversion, position liquidation
(Adds quotes, detail)
By Jessica Mortimer
LONDON, May 20 (Reuters) - The euro fell in volatile trade
on Thursday, staying vulnerable on concerns other European
countries may announce regulation measures after Germany
banned naked short selling of some assets.
Higher-yielding currencies such as the Australian dollar
were under heavy selling pressure as concern over policymakers'
reponse to the euro zone debt crisis fuelled risk aversion,
leading to liquidation of long positions.
The euro stayed above a four-year low of $1.2143 hit on
Wednesday in response to the German ban, but traders remained
nervous similar moves may follow, while broader concerns about
euro zone debt problems further weighed on sentiment.
Traders said fears other European countries may follow
Germany's lead and implement short selling bans pushed European
shares into negative territory and exacerbated the falls in the
euro and perceived riskier currencies.
At 1137 GMT, the euro <EUR=> was down 0.8 percent at $1.2335
in very choppy trading.
"There are a number of negative factors for the global
growth outlook, notably the euro zone sovereign debt worries,
that are generally weighing on risk assets across the board,"
said Lee Hardman, currency strategist at BTMU.
The euro recovered from four-year lows on Wednesday as
traders covered short positions on speculation European monetary
officials might act to check its rapid fall, though for now
market players see intervention unlikely.
Eurogroup Chairman Jean-Claude Juncker said on Thursday he
did not see a need to take immediate action to halt the euro's
decline []. This was echoed by European Union
Competition Commissioner Joaquin Almunia who said there was no
need to intervene. []
"The bias for the euro is still lower but concerns over
excessive short positioning mean the price action will be very
volatile," said Geoffrey Yu, currency analyst at UBS.
Traders said there was a broad tendency to sell into
rallies, adding the euro has failed to get above $1.2440 on
three occasions this week.
"$1.2440 is a treble top and I'm hearing of decent names
selling there. I think any type of rally you sell," a trader at
a European bank said.
AUSTRALIAN DOLLAR
The Australian dollar came under further heavy selling
pressure versus the U.S. dollar and the yen in particular.
"The Australian dollar had got way overvalued - it was
priced almost for perfection and was always vulnerable to a
sharp correction despite strong economic fundamentals," BTMU's
Hardman said.
The Aussie <AUD=D4>, traded down around 2.4 percent versus
the U.S. dollar at $0.8272 after falling to an 8-month low of
$0.8255 in early Europe. It was on track for its biggest weekly
fall since the fallout from the Lehman crisis in 2008.
It fell more than 3 percent to trade below 76.00 yen
<AUDJPY=> for the first time since July 2009.
The U.S. dollar rose 0.3 percent versus a currency basket
<.DXY> to trade at 86.608 after surging to a 14-month high of
87.458 on Wednesday on safe-haven demand.
The dollar was down around 0.7 percent <JPY=> at 90.94 yen.
The low-yielding Japanese currency held decent gains against the
euro <EURJPY=R>, which slipped around 1.5 percent to 112.11 yen.
(Additional reporting by Neal Armstrong)
