* ECB leaves rates unchanged; Draghi sees downside risks * Euro pressured after Spain auction disappoints * Dollar extends gains after Fed curbs QE speculation NEW YORK, April 4 (Reuters) - The euro fell to a three-week low against the dollar on Wednesday after European Central Bank President Mario Draghi said the euro zone economic outlook is subject to downside risks relating to the debt crisis and commodity prices. The euro was already under pressure after Spain's borrowing costs jumped at a bond auction and on reduced expectations of further monetary stimulus in the United States after Tuesday's release of Federal Reserve meeting minutes. Draghi's comments came in a news conference after the ECB announced it was holding interest rates at record lows, as widely expected. The ECB president also told reporters that any talk of an end to loose monetary policy is premature given the poor state of the bloc's economy.. "It seems as though the European Central Bank will continue to carry out its easing cycle in 2012 as the region continues to face a threat for a prolonged recession," said David Song, currency analyst at DailyFX. "Indeed, the ECB left the door open to expand monetary policy further." The single currency dropped 0.8 percent on the day against the dollar to $1.3127. At the trough of $1.3105, it was the lowest since March 16. "There are inflationary pressures coming from higher oil prices, higher indirect taxes in the short term, but inflation expectations are firmly anchored in the medium term," the ECB's Draghi said. "Given the present conditions of output and unemployment, which is at a historical high, any exit strategy talking for the time being is premature." SPANISH AUCTION Spain sold 2.6 billion euros of government bonds, toward the lower end of its target range and at higher yields than at previous auctions. Its borrowing costs had been expected to rise given growing concerns about its public finances. "The market focuses back on Europe after Spain's disappointing bond auction," said Camilla Sutton, chief currency strategist at Scotia Capital. "A key theme is how strict austerity and low growth can turn into a euro negative and vicious cycle." In contrast to the outlook for the euro zone, minutes published by the Fed on Tuesday showed only two of the policy-setting FOMC's 10 voting members saw the case for additional monetary stimulus. The statement sparked a sell-off in U.S. Treasuries, with the 10-year yield last trading around 2.24 percent. Technical analysts highlighted the euro's break below its 100-day simple moving average at $1.3155 as a bearish sign. The euro will likely waver throughout the year near its current levels against the dollar, although it might weaken a few cents more until the currency bloc escapes a bout of mild recession, a Reuters poll showed. The common currency also struggled against the yen, falling more than 1 percent on the day to 107.88 yen, its lowest since March 13. It was last at 108.45 yen. AUSSIE STUMBLES The U.S. currency rallied against the Australian dollar , which dropped to a low of US$1.0238, its lowest since Jan. 13, after Australia posted a surprise trade deficit, fueling expectations its central bank would cut interest rates in May. The Australian dollar broke through support at the 50 percent retracement of the November to February rally, leaving the door open to a test of the 61.8 percent retracement of the same rally. The yen regained ground against the dollar after coming under heavy selling pressure following the Fed minutes and the spike in U.S. Treasury yields. The greenback was last down 0.3 percent on the day at 82.59 yen, retreating from a session high of 82.93 yen. Many market players have been betting on a weaker yen trend since the Bank of Japan's unexpected easing of monetary policy in February. Speculation that the Fed could tighten its own policy faster than previously expected - raising the return for holding dollars - have also weighed on the Japanese currency. The dollar did trim losses against the yen on Wednesday after data showed the U.S. private sector added more jobs than expected in March.