* Euro hovers near 11-month lows versus dollar of $1.2945
* Ratings agencies pile pressure on common currency
* Further euro losses could be limited by short positions
* Death of North-Korean leader lends mild support to dollar
By Neal Armstrong
LONDON, Dec 19, The euro inched down
towards 11-month lows on Monday on concerns that the euro zone
sovereign debt crisis would damage global growth, while the
safe-haven dollar also got support on uncertainty after the
death of North Korean leader Kim Jong-il.
The euro was under pressure after Fitch's warning late
Friday that it could downgrade France and six other euro zone
countries as it believes that a comprehensive solution to the
region's debt crisis is "technically and politically beyond
In addition, Moody's cut Belgium by two notches to Aa3 from
Aa1 on Friday, citing risks to economic growth and the costs of
bailouts of banks such as Dexia.
The euro was down about 0.2 percent at $1.3020 versus
the dollar after falling to an 11-month low last week of $1.2945
on trading platform EBS. The dollar index was flat for
the day at 80.257, paring gains made in the Asian session.
"The main focus for markets remains the developments in
Europe and the subsequent implications for global growth," said
Lee Hardman, currency strategist at BTM-UFJ.
The dollar got knee-jerk support after North Korean state
television reported the demise of Kim Jong-il,
but Hardman played down the likely impact of the news.
"The negative implications for global growth following Kim
Jong-il's death are limited," he added.
The euro remains highly vulnerable to more EU ratings
downgrades as France faces up to a possible double-notch cut by
Standard & Poor's, which put a raft of European nations on
review earlier in December.
Traders said a break of last week's low would open up a
possible test of the 2011 trough around $1.2860.
The common currency was also under pressure against the
Swiss franc, probing support at the 200-day moving
average around 1.2191 after the Swiss National Bank left its cap
on the franc unchanged at 1.20 francs last week.
The dollar was flat against the franc but gained 0.1
percent against the yen to 77.86 yen, while the
Australian dollar was down 0.2 percent at $0.9945.
Investors will focus on a euro zone finance ministers'
teleconference call from 1430 GMT about the draft text of a new
fiscal compact agreed earlier this month. The talks will also
include the size of individual bilateral loans to the
International Monetary Fund.
Short-covering could also provide a lifeline for the euro.
IMM data released on Friday showed net short positions in the
euro against the dollar rose sharply as of Dec. 13, following a
disappointing EU summit.
"With such large short positions, it's very possible that
the euro could get a brief lift on short-covering in thin
conditions ahead of the end of the year, even though pressure
remains from the downgrade concerns," said Koji Fukaya, chief
currency analyst at Credit Suisse in Tokyo.
Dollar resistance lies at $1.3090, which would be a 50
percent retracement of its recent move from $1.3236 to $1.2945.
Any sign of improving credit conditions in the euro zone
would also provide support for the single currency.
The European Central Bank is preparing this week to prop up
euro zone lenders with three-year low-price loans to revive the
struggling interbank lending and funding market.
Banks could take an estimated 250 billion euros ($326
billion) at the first auction of the three-year loans on
Wednesday. Some hope the banks will use the funds to buy EU
sovereign debt and pull yields down.