(Corrects mid-afternoon comment to show dollar rose vs. yen
instead of fell in paragraph 12)
* Euro hits two-month low vs dollar and yen
* Focus on debt worries; Korea tensions
* Dollar index touches two-month high
(Updates prices, adds detail, byline)
By Steven C. Johnson
NEW YORK, Nov 24 (Reuters) - Worries that Ireland's fiscal
crisis could spread to other euro-zone countries drove the
euro down to a two-month low beneath $1.33 on Wednesday, and
traders said the currency is probably in for more losses in
the days ahead.
Though it traded in a wide range and had recouped most of
its losses by midday in New York, traders attributed that to
low volume ahead of a U.S. market holiday for Thanksgiving on
Thursday. The euro was still down 2.7 percent against the
dollar since Monday and is down 4.4 percent so far in
November.
Investors worried that a euro-zone fiscal crisis centered
for now on Ireland could spread to other indebted countries,
notably Portugal and Spain. Ireland's four-year plan,
announced Wednesday, to cut its budget by 15 billion euros did
little to cheer the market. For highlights, click on
[]
The driver is "still Irish and euro-zone concerns, and we
will be talking about this well into 2011," said Brian Dolan,
chief currency strategist at Forex.com in Bedminster, New
Jersey. "The market will continue to expect Portugal to apply
(for aid) and then it will come down to Spain."
The euro was last down 0.2 percent at $1.3348 <EUR=>,
having hit a two-month low of $1.3284 and bouncing off its
100-day moving average -- currently around $1.3297 -- for the
first time since early September.
Analysts are still looking for the euro to test $1.3232,
the 61.8 percent retracement of its August-November rally,
before targeting $1.3000.
The euro also hit a two=month low of 110.33 yen <EURJPY=>
but recovered to 111.40 yen, up about 0.2 percent.
Higher U.S. bond yields, which rose on data showing
improved U.S. labor market conditions, also kept demand for
euros muted, as did the move by Standard & Poor's to cut its
sovereign rating on Ireland. [],[]
"The U.S. labor market has turned a corner, which should
be very positive for the U.S. economy in 2011," said Kathy
Lien, director of research at GFT in New York.
KOREA TENSIONS, SPAIN IN FOCUS
Analysts said euro-zone worries eclipsed concerns about
tensions between North and South Korea, which exchanged
artillery fire a day ago.
Most believed the clash would not escalate, though a North
Korean statement on Wednesday said the South's action was
driving the peninsula to the brink of war.[]
The dollar fell 1.2 percent against the South Korean won,
erasing some of the 3.2 percent advance on Tuesday. <KRW=>.
The dollar also rose 0.3 percent to 83.44 yen <JPY=>. The U.S.
Dollar Index <.DXY> was flat after earlier hitting its highest
level in two months.
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TAKE A LOOK-Korea situation []
Risks to watch on Korean peninsula []
Fed pondered radical policy steps []
TAKE A LOOK-Europe debt problems []
Multimedia on euro zone crisis
http://link.reuters.com/kar27p
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Peripheral euro-zone government bond yield spreads over
Germany have widened, while a poor response to Germany's sale
of 10-year debt also unnerved investors. []
Some traders said if investors were starting to also shun
Bunds -- considered a safe-haven asset -- it was hard to see
how the euro would stabilize in the near term.
The biggest concern for Europe watchers is Spain, the
fourth-biggest economy in the 16-country euro zone and one
that has struggled with a housing collapse and weak banks.
Nomura strategist Jens Nordvig said the outlook on Spain will
be a primary driver of the euro in the coming weeks.
Should the gap between Spanish and German 10-year yields,
now at about 240 basis points, widen by another 200 basis
points, the euro could fall to around $1.23, Nordvig said in a
note to clients.
(Additional reporting by Nick Olivari; Editing by Jan
Paschal)
