* Euro falls, investors look to sell into euro/dollar
rallies
* Debt woes tame optimism over new Italy, Greece govts
* Dlr/yen edges to lowest since Oct. 31 intervention
By William James
LONDON, Nov 14 (Reuters) - The euro fell against the
dollar on Monday as tentative optimism about prospects for
crisis-fighting reforms under new governments in Italy and
Greece gave way in the face of the huge debt problems still
plaguing the euro zone.
Italy sold 3 billion euros of five-year bonds at yields
which, while down from last week's record market highs, were
elevated enough to underscore the challenges the country's new
technocratic government faces to restore market confidence,
leaving many investors bearish on the single currency.
Former European Commissioner Mario Monti was appointed on
Sunday to head a new government in Italy charged with
implementing urgent reforms to end a crisis that has endangered
the whole euro zone.
The single currency was last down 0.75 percent versus the
dollar at $1.3648, with gains following Italy's debt
auction short-lived. It was well below a high around $1.3815 hit
on EBS trading platform after a modest rally in Asian trade.
"The market sees a lot of measures in Italy and Greece but
no solutions," said Stephen Gallo, head of at market analysis at
Schneider Foreign Exchange.
"The Italy auction was barely positive ... Participants
aren't happy to hold the euro above $1.3800 and anywhere in the
$1.3800-$1.3850 range is a sell".
The euro earlier stalled ahead of resistance near its
two-week high of around $1.3870, with offers from Asian
sovereign investors cited above that. Traders cited sizeable
options expiries at $1.3750, while technical support lies at the
100-week moving average around $1.3638.
"When you have good news and the euro doesn't rally, you're
probably going to be headed lower over the week," said Geoff
Kendrick, currency strategist at Nomura in London.
After Italy's 10-year bond yield soared to
levels seen as unsustainable above 7 percent last week, markets
remained nervous over the consequences of more pressure on the
euro zone's largest government bond market.
"The fact that we have these technocratic governments in
place is a positive, in that they'll press toward the sort of
austerity measures required," said Simon Derrick, head of
currency research at Bank of New York Mellon.
In Greece, new Prime Minister Lucas Papademos begins the
tough task of rebuilding Greece's credibility with financial
markets by pushing through the tough austerity measures the
country needs to stave off bankruptcy.
YEN STRENGTHENING
The euro was also lower against the yen, trading down 0.9
percent at 105.09 yen, with traders citing bids above
the 105.00 level. The dollar eased against the yen to 76.811
, its lowest since Japan's Oct. 31 intervention.
"People are gradually realising that another round of
intervention isn't going to come... and so bids look like
they're gradually being shifted lower (in dollar/yen)," Nomura's
Kendrick said.
Appearing to support Japan's recent currency intervention
aimed at curbing excess volatility, the head of the
International Monetary Fund said on Saturday the move was in
line with the spirit of the G7 and G20.
Traders said interventions, particularly unilateral actions
such as Japan's, are unlikely to have a long-term impact and the
dollar may slip on any signs of problems in the U.S. economy.
The dollar index stood at 77.383, well off last
week's high of 78.165. The Australian dollar fell to
$1.0215 from a session high of $1.0351.
