* Euro hits 2-month low vs dollar, 1-month low vs yen
* Concerns grows over weakness in euro zone 'core'
* German economy ministry sees growth slowing
* Investors concerned over timing of Spain bailout request
By Philip Baillie
LONDON, Nov 9 The euro fell to a two-month low
against the dollar on Friday and was seen vulnerable to further
losses on weak euro zone growth prospects and uncertainty over
debt problems in Greece and Spain.
The euro fell 0.3 percent to a low of $1.2706, its
weakest since Sept. 7. It also lost 0.6 percent against the yen
to a one-month low of 100.66 yen on the EBS trading
"There has been a rather poisonous cocktail that is dragging
the euro down with weak European numbers today and renewed fears
of the euro zone crisis with Greece back on the agenda," said
Arne Lohmann Rasmussen, head of FX strategy at Danske markets.
"We would not be surprised if we saw the euro drop to the
1.25 level within the next three to four weeks."
Traders said strong bids ahead of a reported options barrier
at $1.2700 could limit euro losses in the near term. However, if
it breaks below $1.27 it could target the 100-day moving average
around $1.2637 and the Sept. 7 low of $1.26268.
Concern that the economic weakness in indebted southern
European states was spreading to "core" euro zone countries hit
the single currency.
Germany's Economy Ministry said growth was likely to slow in
the fourth quarter and the first three months of 2013.
The French central bank said it expected the euro zone's
second-largest economy to slip into recession towards the end of
2012 and French and Italian industrial production figures for
September were weak.
Investors were wary too before a Greek parliament vote on
Sunday on its 2013 budget. The budget must be passed to unlock a
further tranche of international aid.
As the euro wilted, the dollar's index against a basket of
currencies rose 0.2 percent to 80.939, close to a
two-month high of 81.001 reached on Thursday.
Danske's Rasmussen said worries over the looming "fiscal
cliff", which could trigger tax rises and spending cuts in the
United States if unresolved, was likely to prompt investors to
buy the safe-haven dollar.
U.S. fiscal worries weighed on the dollar against the yen,
however. It fell to a three-week low of 79.18 yen. The
yen is usually the most sought-after currency at times of
financial stress and doubts about an economic recovery.
Uncertainty over whether Spain will apply for financial aid
also cast a shadow over the euro. Such a move would allow the
European Central Bank to buy its bonds and lift the euro.
Spain has so far resisted asking for aid. The prospect of
ECB support has driven its borrowing costs down and it has met
its 2012 bond issuance target.
"We are looking at a game of chicken between Spanish Prime
Minister Mariano Rajoy and the bond markets for looking at a
bailout," said John Hardy, FX strategist at Saxo Bank.
European Central Bank President Mario Draghi said on
Thursday the euro zone economy showed little sign of recovering
before year-end, despite easing financial market conditions.
The Swedish crown weakened against the euro and
the dollar as industrial output saw its largest fall for
more than three years. Danske's Rasmussen said this raised
expectations of a rate cut in December.