FRX: Euro stays near 7-week low on Irish debt woes
* Dollar index hovers near seven-week high
* Market eyes developments in Irish debt crisis
* US consumer prices softer-than-expected (Updates prices, adds detail, changes byline, dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Nov 17 (Reuters) - The euro traded near a recent seven-week low against the dollar on Wednesday and looked set to slide further amid concerns over the lack of a clear solution to Ireland's debt crisis.
The euro earlier slid to a low of $1.3460 on trading platform EBS, not far from a seven-week low hit on Tuesday at $1.3446. Key support lies at $1.3436, the 50 percent retracement of the August to November rally with a break likely opening the way for a drop toward the low $1.30s, traders said.
Euro zone finance ministers have agreed to lay the groundwork for bailing out Ireland's banking sector with the IMF, but Dublin has yet to decide whether to request the aid.
The nervousness grew after European clearing house LCH. Clearnet doubled its margin requirement on Irish government bonds to 30 percent of net positions, citing higher Irish yields over German benchmarks.
"If we get a resolution to Ireland's problems, you could see the euro bounce," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "But the overall bias is to the downside, given uncertainty about not just Ireland but Portugal and Spain. Near-term, it has sold off a lot, but my best bet is it ends the year in the low $1.30s."
The euro was last up 0.1 percent at $1.3509, with traders citing a large option expiry at $1.3450. The single currency has lost 3.2 percent this month as investors have cut long positions as peripheral debt worries mount.
The euro briefly gained after a report showed U.S. consumer prices rose less than expected in October and the increase in the year-on-year core rate was the smallest on record. The data supported the Federal Reserve's decision to ease monetary policy. For details, see [ID:nN16142691]
Markets await the release of the Irish government budget due a week from this Friday before obtaining some clarity on the issue of Ireland's sovereign debt.
Irish Finance Minister Brian Lenihan said talks with the European Union, European Central Bank and International Monetary Fund would start on Thursday. [ID:nLDE6AG004] [ID:nLDE68T0MG]
"Investors are looking at all this euro zone uncertainty and think discretion is the better part of valour," said Simon Derrick, head of currency research at Bank of New York Mellon.
