* Euro slips after Moody's downgrade of Ireland
* Serves reminder that debt problems far from solved
* Dollar stalls again at 84.50 yen
(Updates prices; changes byline, dateline; previous TOKYO)
LONDON, Dec 17 (Reuters) - The euro pared its gains on
Friday after ratings agency Moody's slashed Ireland's sovereign
ratings by five notches, in a timely reminder to investors that
the single currency's debt-related woes are far from over.
Moody's cut Ireland's credit rating to BAA1 from AA2, which
followed Fitch's move last week and many were not too surprised
by the downgrade. [ID:nLDE6BG0EG]
"Of course this downgrade will affect Ireland's ability to
borrow but it's unlikely to lead to a squeeze in investors' euro
positions," said Paul Robson, currency strategist at RBS.
"Also, it's that time when year-end considerations are at
play. The real impact on the euro of all these ratings chatter
will gradually be felt in January."
eased to $1.3300 from the day's high of
$1.3326, though it was still up 0.45 percent on the day.
Sell-stops are said to be building at $1.3160 and chartists say
a break through support around that level would put the euro on
a path to test its 200-day moving average at $1.3104.
A bearish euro view was already being expressed through the
euro-crosses with the single currency hitting a record low
against the safe-haven Swiss franc
. The euro fell to
a low of 1.2720 francs, before recovering to 1.2785 francs.
The Swedish crown also rose to its highest level against the
euro since 2006 on Friday. The euro
traded at 8.9805
to the crown before rising to 9.0039.
Euro zone graphic package: r.reuters.com/hyb65p
More on euro zone debt: [ID:nLDE6T0MG]
That drop came as EU leaders agreed at a summit on Thursday
to make minor changes to the group's governing treaty to
establish a permanent mechanism from mid-2013 to resolve
sovereign debt problems. [ID:nLDE6BF24I]
A draft statement, to be issued at the end of the two-day
summit, showed euro zone leaders will declare their readiness to
ensure adequate funds are available for the euro zone rescue
fund, the European Financial Stability Facility (EFSF).
But analysts say the euro is not out of the woods as
European policymakers still appear divided over more concrete
measures, such as making more money available to the European
Financial Stability Facility. [ID:nLDE6BE1JV]
Data later on Friday includes Germany's IFO business climate
index for December, which is forecast at 109.1, compared to
109.3 previously. The current conditions index is expected to
edge up to 112.5 from 112.3.
The dollar paused after oversold U.S. Treasuries gained a
bit of ground, taking the benchmark yield off this week's highs.
The dollar's failure to push through the top of this month's
trading ranges against the euro and yen has left the market in
consolidation mode as operations wind down for the year-end.
"For the nearer term, European policy makers still have much
work to do and the slightly run of better U.S. data can keep the
dollar supported," said Chris Turner, chief currency strategist
The dollar was marginally lower at 83.90 yen, having
repeatedly failed to break cleanly above 84.50 yen
late November, in spite of higher yields on the back of
improving economic data.
Market attention will continue to focus on U.S. Treasury
yields into the new year. The benchmark 10-year yield
hit a seven-month peak on Thursday of 3.57 percent
but has pulled back since then, making traders wonder whether a
sharp sell-off is coming to an end.
Some players note there has been a weakening in the
dollar/yen's correlation with U.S. bond yields, which some say
could be due to incipient concerns about potential deterioration
in U.S. fiscal conditions after an agreement to extend tax cuts.
(Additional reporting by Charlotte Cooper in Tokyo; Editing by