By Wanfeng Zhou NEW YORK, Oct 20 (Reuters) - The euro fell against the dollar on Thursday amid growing doubts that this weekend's European Union summit will provide any concrete solution to contain the escalating debt crisis. Trading was volatile as investors reacted to each headline coming out of Europe underscoring differences among policymakers on how to support the heavily-indebted euro zone countries. There's "growing investor realization that the upcoming European policymakers' summit may not yield a lasting solution to the ongoing euro zone debt crisis after all," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston. Adding to a bearish tone, Fitch Ratings says in a report that its outlook for Italy's largest banks is negative. The agency also kept a negative outlook on Belgium, warning it could downgrade the country if the euro zone debt crisis escalates. The euro last traded down 0.6 percent at $1.3679. It earlier hit a session low of $1.3655 on Reuters data, breaking below support around the 100-week moving average at $1.3671. As the weekend meeting approaches, analysts said the euro was likely to stay in a range between its recent low around $1.3650 and a high around $1.3914. The bloc's common currency had earlier climbed a session high of $1.3842 after guidelines for the European Financial Stability Facility (EFSF) obtained by Reuters showed the fund will be able to buy bonds on the secondary market using its full remaining lending capacity. But gains faded after a report by German newspaper Die Welt -- later denied by euro zone sources -- that the German government does not rule out postponing Sunday's summit. The newspaper cited stalled negotiations on the possible leveraging of the EFSF as the reason for the possible delay. Losses accelerated after sources in Germany's ruling coalition said the EU summit will go ahead on Sunday as planned, but it will not reach a decision on leveraging the euro zone rescue fund. The sources also said Chancellor Angela Merkel will not address the German parliament before she departs for the Brussels summit. Against the Swiss franc, the euro was last down 0.9 percent to 1.2306 francs . It slipped 0.5 percent to 105.14 yen . The dollar rose 0.1 percent to 76.85 yen , while against a basket of currencies, the dollar was up 0.4 percent at 77.444 . MIXED MESSAGES Optimism that European leaders will deliver a comprehensive solution to debt problems by this weekend's summit had buoyed the euro to a one-month high on Monday, but the currency has since pared gains on growing signs of differences between policymakers on how to tackle the crisis. "There are a lot of mixed messages," said Fabian Eliasson, vice president for currency sales at Mizuho Corporate Bank in New York. "So people may be becoming a little bit more pessimistic." European policymakers were struggling to reach consensus on measures to contain the debt crisis in the lead up to the EU summit and a Group of 20 summit in early November. French President Nicolas Sarkozy on Wednesday said that plans to tackle the euro zone debt crisis have stalled with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund. "In these troubled waters, we maintain a view that the euro/dollar should head much lower as short-term disappointment looms," said Sebastien Galy, currency strategist at Societe Generale in London. Galy said his target for euro/dollar is $1.31, although he recommends investors place a tight stop at 1.3930 given the risk of a squeeze of euro bearish positions.

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