FOREX-Euro falls broadly after German data, Moody's warning

* German data dims euro outlook
* Moody's changes German rating outlook to negative
* Greece could miss debt reduction - EU officials

By Wanfeng Zhou
NEW YORK, July 24 (Reuters) - The euro tumbled to a two-year
low against the dollar for a third consecutive session on
Tuesday, pressured by weaker-than-expected German data, a day
after Moody's warned of fallout from Europe's debt crisis on the
region's strongest economies.
Analysts said the euro looked poised to take out the key
$1.20 area, but further losses could be limited as markets shift
attention to a Federal Reserve meeting next week when
policymakers will likely discuss the possibility of further
stimulus for the U.S. economy.
Manufacturing in Germany, the euro zone's biggest economy,
contracted at its fastest pace in more than three years and its
service sector also shrank. In France, factory activity fell at
its fastest pace since May 2009.
The data came a day after Moody's revised its outlook for
Germany, the Netherlands and Luxembourg to negative, warning
that Europe's top-rated countries may have to increase support
for indebted states such as Spain and Italy.

"There's overall caution and concern that the stronger
countries may not have either the willingness or the ability to
help out the periphery," said Vassili Serebriakov, senior
currency strategist at Wells Fargo in New York.
The euro fell as low as $1.2040, its weakest level
since June 2010, extending losses after some EU officials said
Greece is unlikely to be able to pay what it owes and further
debt restructuring is likely to be necessary. It was last at
$1.2062, down 0.4 percent.
Inspectors from the European Commission, the European
Central Bank and the International Monetary Fund returned to
Athens on Tuesday and will complete their debt-sustainability
analysis next month.
Against the yen, the euro lost 0.7 percent to 94.31 yen
, having hit 94.09 yen, an 11-1/2-year low. The dollar
lost 0.3 percent to 78.16 yen.
The euro also fell against higher-yielding currencies. It
traded at A$1.1789 against the Australian dollar, near Monday's
record low of A$1.1679, and at C$1.2319 versus the
Canadian dollar, also near a record low.
Since the European Central Bank cut interest rates earlier
this month, the euro has fallen heavily against a range of
currencies as investors increasingly use it as a funding
currency to purchase higher-yielding assets.
Losses in the currency also accelerated after Spanish bond
yields jumped well above the 7 percent danger level this week,
raising fears Madrid will need a full-scale sovereign bailout.
Spanish bond yields rose further on Tuesday after the
country paid its second-highest yield to issue short-term debt
since the introduction of the euro in 1999.

FED ACTION
Attention could start to shift to Friday's first reading of
U.S. second-quarter growth, analysts said. A weak number could
boost expectations of another round of bond-buying, or QE3, from
the U.S. central bank and weigh on the dollar.
Data earlier showed U.S. manufacturing this month expanded
at its slowest pace since late 2010, hobbled by weak overseas
demand for American goods, though a rise in domestic orders
helped cushion the blow.
The dollar slightly pared gains versus the euro in late
trade after the Wall Street Journal said Federal Reserve
officials were moving closer to taking new steps to spur
activity and hiring.
Top Fed officials recently have spelled out what measures
they might take, including Chairman Ben Bernanke in a speech
last week.
"Nothing drastic, but the news was notable enough to soften
the dollar. People are getting tired and numbed by rhetoric and
they are looking for signs of action," said Brad Bechtel,
managing director at Faros Trading in Stamford, Connecticut.