* Euro off lows on German ZEW, but debt worries remain
* Euro vulnerable as euro zone finance ministers meet
* U.S. yields support dollar, hits 6-week high vs yen
(updates prices, adds graph on high-yielders)
By Jessica Mortimer
LONDON, Nov 16 (Reuters) - The euro came off a near seven-
week low against the dollar on Tuesday, helped by above-forecast
German data, and as investors waited to see whether euro zone
ministers could agree a solution to Ireland's debt problems.
Analysts said the euro may earn a reprieve if the finance
ministers meeting in Brussels reach a deal, which would temper
concerns the debt crisis could spread to Portugal and suck in
bigger states.
Ireland has so far insisted banks may need help but the
state does not. []
Gains for the euro, which has been under pressure in recent
days as anxiety over Irish finances has increased, were expected
to be limited with investors mindful of the severity of the debt
problems facing the euro zone's periphery.
"The worst case scenario is contagion risk and it might give
the euro a short-term boost if Ireland were to accept some kind
of bailout, although we would still be looking at a downside
bias for euro/dollar," said Jeremy Stretch head of currency
strategy at CIBC.
The euro firmed after a survey by think tank ZEW showed
German analyst and investor sentiment rose more than expected in
November. []
It was also helped by comments from U.S. Federal Reserve
officials which pulled the dollar off its highs.
New York Fed President William Dudley said conditions for an
exit from U.S. monetary easing could be "years away", while Fed
vice chairwoman Janet Yellen defended the Fed's recently agreed
bond purchase plan. [] []
But U.S. bond yields stayed close to a three-month high near
2.97 percent <US10YT=RR> hit on Monday, increasing the allure of
dollar assets and helping lift the dollar to a six-week high
against the low-yielding yen.
The euro <EUR=> was 0.2 percent higher at $1.3609, off an
earlier low of $1.3560, its weakest since late September. That
took it below its 55-day moving average, now at $1.3567, and the
top of the cloud on daily Ichimoku charts at $1.3565.
Downside targets included $1.3463, a 50 percent retracement
of the euro's September-November rally, and $1.3364, a 38.2
percent retracement of its June-November rally.
DOLLAR HITS 6-WEEK HIGH VS YEN
The dollar index, which measures the dollar against a basket
of currencies, gained 0.12 <.DXY> to 78.61, off an earlier high
of 78.761, its strongest since Oct. 1.
The dollar also rose to a six-week high of 83.33 yen <JPY=>
as the gap between U.S. and Japanese bond yields <US10YT=RR>
<JP10YT=RR> moved further in the dollar's favour.
The dollar was above its 55-day moving average, now at 82.83
yen and offering support, and broke through resistance on daily
Ichimoku charts at 83.17 yen, the bottom of the cloud. The top
of the cloud was at 84.13 yen.
Positioning data showed speculators cut short dollar
positions as well as long euro positions significantly [].
Traders said leveraged funds had flipped long euro/dollar
positions, suggesting year-end position adjustment may favour
the dollar.
"Any bounce in euro/dollar will be seen as a selling
opportunity in the current environment," said Niels Christensen,
currency strategist at Nordea in Copenhagen, adding that the
euro would stay weak as long as uncertainty remained over how
Ireland's debt problems would be resolved.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EU safety net description []
More on how Ireland might tap funds []
Graphics:
Debt distribution http://link.reuters.com/rak65q
Bank exposure to Irish debt http://r.reuters.com/fez84q
Euro zone struggles with debt http://r.reuters.com/hyb65p
Ireland's bailout challenge http://r.reuters.com/wuv48p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
That along with fears the China will tighten monetary policy
led investors to cut long positions in high-yielding currencies
like the Australian dollar. The Aussie <AUD=D4> lost 0.5 percent
to fall to its lowest in over two weeks at $0.9784.
(additional reporting by Anirban Nag)
