* Dollar index hovers near seven-week high
* Market eyes developments in Irish debt crisis
* Fed comments marginally hurt greenback
By Ian Chua and Hideyuki Sano
SYDNEY/TOKYO, Nov 17 (Reuters) - The euro hovered near a
seven-week low versus the dollar on Wednesday, threatening to
deepen a 5 percent slide seen so far this month with no immediate
solution for Ireland's debt crisis in sight.
While euro zone finance ministers agreed to lay the
groundwork for bailing out Ireland's banking sector with the IMF,
Dublin has yet to decide whether to request the aid.
The uncertainty created by the euro zone problems benefitted
the dollar, adding fuel to the short-covering rally that on
Tuesday drove the greenback to a seven-week high of 79.461 <.DXY>
against a basket of major currencies.
Although comments from Fed officials advocating further
easing steps if needed briefly pushed down the dollar, traders
expect its rally to continue after it rose on Tuesday despite a
sharp fall in U.S. bond yields.
"It seems as if the dollar is being bought no matter what
factors are in the market," said a trader at a Japanese bank.
Many traders suspect more buying back of the dollar is likely
ahead of the year-end, when many players close their books.
The euro <EUR=> traded at $1.3500, up 0.1 percent on the day
but not far from a seven-week trough of $1.3446 hit on trading
platform EBS on Tuesday.
A convincing break there and then at $1.3436, a level
representing the 50 percent retracement of the August to November
rally, could pave the way for the euro to test $1.3334, the peak
of the June-August rise.
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Description of EU safety net: []
How Ireland might tap funds: []
Euro zone debt struggles: http://r.reuters.com/hyb65p
Multimedia coverage on Euro Zone crisis on Top News:
http://r.reuters.com/hus75h
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The euro drew marginal support after the Wall Street Journal
reported that Boston Federal Reserve President Eric Rosengren
said the Fed would need to consider more action if the economy
weakens, and that Chicago Fed chief Charles Evans said the $600
billion earmarked for purchases of Treasury bonds was a "good
place to start." []
LOUDER OBJECTIONS
Their comments came as objections to the Fed's new stimulus
effort have grown steadily louder since November elections swept
Republicans into control of the House of Representatives, with
two U.S. Republican lawmakers now calling on the Fed to focus
solely on inflation and ditch its "dual mandate" to promote both
price stability and full employment. []
The dollar kept within sight of a six-week high of 83.60 yen
yen <JPY=> struck on Tuesday, and last traded at 83.42 yen on
Wednesday, up 0.1 percent on the day.
While constant selling from Japanese exporters is keeping the
dollar's advance slow, some traders say the greenback could rise
to around 85 yen.
On the daily Ichimoku chart, a break above the top of cloud,
which sat near 84 yen on Wednesday and will be around 83.70 yen
for the next few days, would send a strong bull signal.
Against a basket of major currencies, the dollar <.DXY>
<=USD> stood at 79.194, not far from Tuesday's seven-week high of
79.461 after having broken the 78.90/79.10 resistance zone.
It is facing a major support-turned-resistance area between
79.55-80.05, a sustained break of which could point to more
strength in the dollar in the medium term.
"It's part of the ongoing trimming of the big trades that
started to be put on in real size in late September of weak
dollar and risky assets in anticipation of Fed QE spilling into
emerging markets," said Sean Callow, a strategist at Westpac
Bank.
The Australian dollar <AUD=D4> traded at $0.9760, down 0.1
percent on the day, after having skidded to $0.9725 on Tuesday, a
low not seen since Oct. 29.
The Aussie's slide was worsened by persistent worries that
China, Australia's largest export market, would tighten monetary
policy to keep a lid on inflation and thus risk slower growth.
Still, analysts note such worries proved misplaced earlier in
the year and actual activity data from China has surprised on the
upside in the last couple of months.
(Additional reporting by Masayuki Kitano; Editing by Chris
Gallagher)
