* Euro shaky, markets wary of contagion to core countries
* Euro support seen at $1.3410 but test of $1.3145 likely
* With crisis getting dire, ECB may be forced to act -analyst
* NY Fed calls on prime brokers to raise collateral spooks traders
TOKYO, Nov 16 (Reuters) - The euro slipped to a fresh one-month low against the dollar and the yen on Wednesday as the euro zone debt crisis threatened to engulf top-rated members such as France, as government bonds of core countries came under pressure.
The common currency fell as far as $1.3437, its lowest level in more than a month, after the French bond yield spread over benchmark German bunds hit euro-era highs near 200 basis points and the spread of triple-A rated Austria also shot up.
Italian yields spiked back above the critical 7 percent level as the appointment of former EU Commissioner Mario Monti to head a new government failed to quell concerns over the country's long-term political and economic future.
"It's not clear if a new government in Italy can carry out measures that would satisfy the market. I would not be surprised if the euro falls to around $1.30 within two weeks," said Masafumi Yamamoto, chief strategist at Barclays (LSE: BARC.L - news) .
Funding strains among European banks are evident with euro/dollar three-month cross currency basis swap spreads widening to a level not seen since late 2008.
With the currency bloc caught in a vicious cycle of falls in government bonds hurting the region's big banks, further undermining confidence in the area, the euro is coming under heavy pressure.
The next immediate target for euro/dollar is seen at $1.3405-10, the bottom of the weekly Ichimoku cloud and a 76.4 percent retracement of the pair's rally last month. A break there would open the way for a test of the Oct (KOSDAQ: 039200.KQ - news) . 4 low of $1.3145.
Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, said the debt crisis that started in Greece two years ago may be festering even in Germany.
"In the past, the spreads of periphery countries gained as their bond yields rose, while German bund yields fell. But these days bund yields hardly fall. What this means is that the debt domino is almost reaching Germany," Uno (KOSDAQ: 114630.KQ - news) said.
"I think the ECB is likely to take policy action, probably buying more government bonds and cutting rates, even before the next policy-setting meeting on Dec. 8," he added.
EUROPEAN CONCERNS
Positive U.S. retail data on Tuesday did little to help mitigate worries over the global economy.
"While it is clear that the data in the U.S. is improving, European concerns far outweigh at present," said David Scutt, a trader at Arab Bank Australia in Sydney.
"Markets are clearly expecting a circuit breaker to alleviate pressure on periphery bond yields. If no announcement is forthcoming in the days ahead, one suspects that the situation could unravel fairly quickly."
Political developments in two euro zone hot spots were mixed. In Rome, Prime Minister designate Monti will meet the Italian president on Wednesday to present a new government.
But in Athens, Greek conservatives said they would not bow to "dictates from Brussels" over a bailout designed to save their country from bankruptcy and safeguard the euro.
The market was also spooked by the news that the New York (Frankfurt: A0DKRK - news) Federal Reserve will be increasing the collateral requirements on primary-dealer banks in transactions dealing with mortgage-backed securities, in an effort to lower the settlement risks with its counterparties.
"I don't understand exactly why the Fed has done this when it wants to support housing markets by buying MBS, but this does suggest the Fed is anticipating serious conditions and is taking measures against deterioration in the euro zone crisis," said a Japanese bank trader.
Rumours about more credit downgrades in Europe (Chicago Options: ^REURUSD - news) -- though hardly unusual these days -- dogged the euro.
The wobbly euro lifted the dollar index to a one-month high of 78.375, well off the week's low of 76.751.
Broad risk aversion also hit commodity currencies hard, with the Australian dollar falling more than one percent to $1.0063.
The dollar held steady against the yen around 77.00, with the threat of more intervention by Japan (EUREX: FMJP.EX - news) keeping investors wary of buying the Japanese currency. The Bank of Japan kept its policy on hold as expected.
Euro zone and U.S. inflation data will be in focus next and a stronger-than-expected result for Europe may dim prospects for a follow-up interest rate cut by the European Central Bank. (Additional reporting by Ian Chua and IFR's John Noonan in Sydney; Editing by Joseph Radford)
