FOREX-Yen slips to 7-mth low vs dlr; euro zone outlook bleak

(Updates prices, adds quotes, links and graphics; changes dateline, previous LONDON; changes byline)

* Yen falls to 7-month low versus dollar of 80.37 yen

* Dollar resistance around 80.40 yen seen as key

* Euro zone services PMI disappoints, Greece concerns persist

* Sterling falls after BoE minutes

NEW YORK (Frankfurt: A0DKRK - news) , Feb 22 (Reuters) - The yen skidded to a seven-month low against the dollar on Wednesday, with more weakness expected as recent monetary easing in Japan (EUREX: FMJP.EX - news) , a rise in oil prices and interest rate differentials weigh on the currency.

The euro was flat against the greenback as market participants continued to weigh the implications of Greece's bailout deal and a euro zone economy that is teetering on the brink of a recession.

The yen has been on the defensive since the Bank of Japan's surprise move to boost its asset buying program last week. Some analysts said the move could mark the end of the yen's long-term uptrend that prompted Japan to intervene in the currency market three times last year.

"We are looking at a sea change in the strength of the yen," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

"Japanese life insurers have been removing their hedges since last week and that is putting pressure on the yen," he said. "The Bank of Japan's movement to inject additional QE (quantitative easing) has been weighing and its setting of an inflation target sets the stage for even more QE."

The drop in the yen has also been mirroring rising yields in U.S. Treasury securities, at the short end in particular. Oil prices were at a 9-month high and also weighed on the yen.

"Japan lost a great deal of nuclear power after last year's earthquake, so the rise in oil prices is also a factor."

The dollar hit a peak of 80.37 yen, its highest since mid-July, with traders citing buying by Japanese importers and offshore players. This took it beyond highs hit in October and August after Japanese authorities acted to curb yen gains.

Comments from a Japanese Ministry of Finance official that there was still a risk of the yen rising, and that Japan would continue to monitor currency moves carefully and would respond as needed, added to broad yen weakness.

The dollar faced resistance around 80.38 yen, the July 12 high, with traders reporting demand to sell around that level and ahead of an options barrier at 80.50 yen.

The dollar has risen roughly 5 percent against the yen so far in February, putting it on track for its biggest monthly percentage gain since March 2010. The euro rose to a three-month peak of 106.32 yen, its highest since mid-November (Stuttgart: A0Z24E - news) , and was last up 0.7 percent at 106.26 yen.

DANGER OF EURO ZONE RECESSION

But the euro retreated from near two-week highs against the dollar hit the previous day as optimism over the long-awaited Greek bailout deal reached early on Tuesday gave way to concerns about economic growth and implementation risks.

Data on Wednesday indicated the euro zone economy is in danger of tipping into recession, with the services sector shrinking this month along with manufacturing.

Surveys of purchasing managers showed unexpectedly weak activity in the region's most powerful economy, Germany, and in France.

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Euro zone PMI & GDP growth: http://link.reuters.com/rud84s

France PMI & GDP growth: http://link.reuters.com/vuv26s

German PMI, IFO & GDP growth: http://link.reuters.com/puq93S

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The euro was steady at $1.3232, below Tuesday's high of $1.3293, its highest level since Feb. 9. Since late January the euro has traded in a range roughly between $1.30 and $1.33.

But the euro rose to a two-month high against sterling as the UK currency fell after Bank of England minutes showed two votes for larger asset purchases this month, increasing the risk of more easing later this year.

Market attention was also focused on the European Central Bank's next long-term refinancing operation next week. The ECB is expected to lend nearly 500 billion euros to banks, although some forecasts were as high as 1 trillion.

"If the take-up is higher I think the euro goes up on that, it plays on more liquidity being positive for risk appetite. We could see it the other side of $1.35, " said Adam Cole, global head of FX at RBC Capital Markets.

"But there's an equally large camp that believes LTROs are close enough to quantitative easing to be more currency-negative the larger they are." (Additional reporting by Nia Williams in London; Editing by Chizu Nomiyama)

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FOREX-Euro slips to 5-week lows as debt crisis deepens

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* Euro hits five-week low, eyes Oct (KOSDAQ: 039200.KQ - news) . trough around $1.3140

* ECB's buying Italian bonds fails to bring down yields

* More euro losses seen as crisis spreads to core Europe (Chicago Options: ^REURUSD - news)

(Updates prices, adds comment, details)

NEW YORK (Frankfurt: A0DKRK - news) , Nov 16 (Reuters) - The euro fell to five-week lows against the dollar and yen on Wednesday as rising French and Italian borrowing costs heightened concerns about contagion in the euro zone debt crisis.

The European Central Bank's purchase of Italian and Spanish bonds brought only temporary relief. Once intervention stopped, yields resumed climbing as investors doubted how much the ECB can buy to support the bond market.

Analysts expect the euro to remain under pressure as troubles in the periphery appear to be spreading to core nations in Europe with France the latest target of investor angst as policy makers remain behind the curve in finding a solution to the region's debt problems.

"The euro/dollar is being pushed and pulled by many things in the market of late, but ECB intervention in the Italian and Spanish bond markets seems to give the pair some support and comfort today," said Greg Michalowski, chief currency analyst at FXDD, a retail brokerage in New York. "Tomorrow Spain is scheduled to sell 4 billion 10 year bonds. How that auction goes will give the market a clue as to the real demand from investors."

The euro was last little changed at $1.3534 , after earlier dropping as low as $1.3427 on Reuters data, the weakest level since Oct. 10.

Against the yen, it traded at 104.26 yen , after earlier hitting 103.37 yen.

The common currency also came under pressure after Italian bank UniCredit (MDD: UCG.MDD - news) said it would ask the ECB to extend its access to funding, stoking concerns about the health of euro zone banks. [ID:nL5E7MG237]

"Markets are slowly losing their will to believe in an EU solution, and this is being reflected in the debt market," said Paul Bregg, a currency trader at Western Union Business Solutions in Denver, Colorado.

Traders cited euro selling from macro funds. Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston, said net inflows into the euro "have virtually dried up, with the seeming hesitation on the part of even the more tactical market participants."

The dollar slipped 0.1 percent to 77.03 yen .

Dollar/yen has now broken through the 61.8 percent Fibonacci retracement of the move on intervention on an intraday basis for four straight days.

ECB ROLE

Bond purchases by the ECB initially pushed Italian yields down to around 6.83 percent and sparked a rebound in the euro. But yields later climbed back above 7 percent, a level widely deemed unsustainable.

Mario Monti, a former European commissioner, was sworn in as prime minister and formed a new technocrat government in Italy on Wednesday, but analysts were skeptical the move would be enough to calm financial markets.

In a sign the debt crisis is spreading to Europe's core economies, the yield spread between French 10-year government bonds over German Bunds hit its highest level since the euro's launch in 1999 before easing. France is the second-largest economy in the euro zone.

This made for a difficult backdrop for auctions of up to 11 billion euros of Spanish and French bonds Thursday. The Spanish sale of new 10-year debt is likely to struggle as the country's finances come under scrutiny days before a general election.

France and Germany clashed over whether the European Central Bank (Other OTC: CBSU.PK - news) should intervene to halt the debt crisis.

A French government spokeswoman said the ECB's role is to ensure the stability of the euro, but also the financial stability of Europe. But German Chancellor Angela Merkel made clear Berlin would resist pressure for the central bank to take a bigger role in resolving the debt crisis. [ID:nL5E7MF410] Western Union (NYSE: WU - news) 's Bregg said the rise in French borrowing costs was especially worrying. "Rumors of a debt downgrade are circling daily. This is not good news, especially when France is one of the main funding countries for the bailout fund and Europe's number two economy." (Reporting by Nick Olivari and Wanfeng Zhou; Editing by Andrew Hay)

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FOREX-Euro slips on rising contagion, growth fears

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* Italian, Spanish yields rise as contagion fears grow

* Investors doubt Europe (Chicago Options: ^REURUSD - news) 's ability to contain debt crisis

* Euro/dollar nears support at $1.3481, yen strengthens

(Adds comments, details, updates prices)

NEW YORK (Frankfurt: A0DKRK - news) , Nov 15 (Reuters) - The euro fell against the dollar for the second straight day and hit a five-week low against the yen on Tuesday, with more selling expected on fears the euro zone's debt crisis is spreading across the region.

Yields on Italian benchmark 10-year bonds climbed back above the key 7 percent, a level widely deemed unsustainable, and Spanish borrowing costs rose ahead of the launch of a new 10-year bond launch on Thursday. [GVD/EUR]

In a worrying sign of contagion, the spread of French, Belgian and Austrian 10-year bond yields over German Bunds all hit their highest levels since the euro was launched in 1999, while the equivalent Dutch spread hit its widest since early 2009.

Adding to bearish sentiment, the German ZEW survey showed analyst and investor sentiment slumped in November (Stuttgart: A0Z24E - news) , the ninth monthly decline in a row. It said political and economic problems in Greece and Italy had raised uncertainty about the future. For details, see [ID:nF9E7JH017]

"The collective markets' greatest fear has materialized: contagion is now reality," said Christopher Vecchio, Currency Analyst at DailyFX.com. "The seven percent threshold was supposed to be the line in the sand that the supranational European body would not allow Italian yields to cross, and for the second time in less than a week, Italian 10-year bonds were above this level."

The euro fell 0.6 percent to $1.3536, having dropped to a session trough of $1.3495 according to Reuters data. Key downside support lies around $1.3481, a one-month low set last week.

The euro zone common currency also lost 0.7 percent to 104.27 yen , after sliding as low as 103.95 -- the weakest since Oct (KOSDAQ: 039200.KQ - news) . 10.

DISORDERLY OUTCOME

The market's optimism over the new technocrat-led governments in Greece and Italy proved short-lived as investors refocused on worries about the ability of European policymakers to contain the deepening crisis, which German Chancellor Angela Merkel called Europe's "toughest hour since World War Two."

Lee Hardman, currency economist at BTMU in London expects the euro to fall to around $1.25 over the next six months, saying there was a risk the market would start to price in a "disorderly outcome" to the crisis.

"The ultimate outcome is still unclear -- whether the euro zone moves closer to fiscal integration or whether there is a more disorderly break-up," Hardman said.

Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said repatriation flows have temporarily supported the euro, but they will dry up, removing an important piece of support.

Data from the Commodity Futures Trading Commission on Monday showed speculators trimmed bets against the euro in the week to Nov. 8, suggesting the diminishing scope for a short-covering rebound in the common currency. [IMM/FX]

The dollar slipped 0.2 percent to 77 yen , hovering around its 50-day simple moving average at 76.95 yen. It had earlier jumped to a high of 77.51 yen on trading platform EBS.

Traders said investors would likely sell the dollar on rallies as the yen was well-placed to gain in a risk-averse environment despite the possibility of Japanese action to curb the yen's strength.

The dollar climbed to a five-week peak against the Swiss franc . (Reporting by Nick Olivari and Wanfeng Zhou; Editing by Andrew Hay)

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