FOREX-Euro falls to 2-year low vs U.S. dollar

* Euro slides, breaks below $1.2300
* Euro nears record lows vs Australian, NZ dollars
* Greenback reaches 1-1/2-year high vs Swiss franc
* Weak U.S. jobs reading hurts risk appetite
* Interest rate differentials play to U.S. dollar's favor

By Daniel Bases
NEW YORK, July 6 (Reuters) - The euro fell to a two-year low
against the U.S. dollar on Friday after a report showed U.S.
employers hired at a dismal pace in June, stoking strong risk
aversion and a flight to safe havens that put recent central
bank interest rate cuts in stark relief.
The report appeared to fuel concerns that Europe's debt
crisis is shifting the U.S. economy into low gear.

The weak U.S. jobs data came a day after the European
Central Bank cut interest rates, further dampening the euro's
appeal, and China and the Bank of England announced more
monetary easing.
With U.S. interest rates already near zero the loosening of
monetary policy in Europe and China diminishes the relative
interest rate advantages held over the greenback.
"Risk premiums come down and at some point interest rates
don't compensate for sovereign risk," said Paresh Upadhyaya,
director of currency strategy at Boston-based mutual fund
company Pioneer Investments, which has $200 billion in assets
under management.
"Today's employment number, not so much that it fell short
of expectations, but that the data was likely strong enough to
keep the Fed at bay," he said, referring to pressure on the U.S.
central bank to engage in more bond buying operations to inject
cash into the economy, also referred to as quantitative easing.
While the dollar was the safe bet against the euro,
investors flocked to the yen as an even safer bet than the
dollar.
"You might expect the yen to gain against the U.S. dollar -
as you're seeing now - as it will be the preferred safe-haven
currency for today," said John Doyle, senior strategist at
Tempus Consulting in Washington.
The euro fell 1 percent to a two year low of $1.2264
before rebounding to $1 .2296, off 0.77 p ercent on the day. The
dollar rose to a 1-1/2-year high against the Swiss franc.
The U.S. Labor Department said on Friday nonfarm payrolls
expanded by just 80,000 jobs in June, falling short of forecasts
though a tad higher than a revised May reading of 77,000. Job
creation during the month wasn't enough to bring down the
country's lofty 8.2 percent unemployment rate.
Against the yen, the dollar slipped 0.33 percent to 79.61
y en, off an earlier three-day low.
The euro lost 3 percent against the dollar this week, its
worst weekly performance since the week ended Sept. 11. The
dollar is down 0. 35 pe rcent against the yen for the week.
"Politically and economically, it is not the environment for
the euro to rally ... In a week or a month's time, it can easily
get back down towards below $1.2280 and maybe even head towards
$1.20," Kathleen Brooks, research director at FOREX.com said in
London.

MORE EURO WEAKNESS
The ECB on Thursday cut its main interest rate to 0.75
percent and the deposit rate to zero, reducing the incentive to
hold a currency already beset by debt problems.
Many analysts say the ECB's easing this week will lead the
euro to take on the role of a funding currency - used to finance
investments in higher-yielding assets - meaning it could
struggle to make ground even when share prices rise.
"A weaker euro has to be one of the least costly solutions
to the euro zone crisis," said Chris Turner, head of ING head
currency strategy in London, adding he expected the euro to see
an "orderly decline" towards $1.15 by year-end.
A Reuters poll conducted after the ECB rate cut showed
economists expect more measures from the central bank in the
coming months, possibly including another round of cheap,
long-term loans for banks.
The euro also stayed near record lows hit on Thursday versus
the Australian and New Zealand dollars .
Against the Swiss franc, the euro was at 1.2006 francs
, continuing to hover just above the 1.20 floor for the
euro/Swiss franc rate imposed by the Swiss National Bank last
year in an attempt to keep its economy competitive.
The dollar traded up 0.73 percent to 0.9763 Swiss franc
, off the fresh 1-1/2-year high of 0.9789 after the jobs
data.
Many in the market believe the SNB will struggle to maintain
the cap, with data on Friday showing the SNB's foreign exchange
reserves jumped 19 percent in June as the euro zone crisis
forced it to intervene heavily.
The higher-yielding Australian dollar was down 0.63 percent
a gainst the U.S. dollar at $ 1.0222, off a two-month high
hit on Thursday following China's surprise interest rate cut.
China is Australia's single largest export market.