Euro falls to 3-week low against broadly firmer dollar

LONDON Jan 3 (Reuters) - The euro extended falls against a broadly firmer dollar on Thursday, hitting a fresh three-week low on worries about the prospect of more U.S. budget wrangling in coming weeks.

The euro fell 0.6 percent to $1.3108, its lowest since mid-December as optimism following this week's deal to avoid steep tax rises and spending cuts faded.

Traders said it extended falls on selling by a U.S. name after stop loss sell orders were triggered on the break below a low set in Asian trade around $1.3124. More stop loss sell orders were reported below $1.3090.

The dollar index, which measures the dollar's value against a basket of currencies, also rose to a three-week high of 80.116, while the euro dropped to a three-week low against the UK pound of 80.86 pence. This took it well below an 8-month high of 82.25 pence struck last week.