POLL - Euro outlook cut again on Greek contagion fears

An official of the Volksbank Bosnia branch presents a handful ofnewly-launched euro bank-notes in the capital Sarajevo on in this January 2002 file photo.

LONDON (Reuters) - The euro will struggle over the coming year, according to the latest Reuters foreign exchange poll which again saw analysts paring back forecasts for the battered common currency as the Greek debt crisis rumbles on.

The poll of 58 analysts, taken April 29-May 5, predicted the euro would slide to $1.28 in a year, under the one-year low of $1.2936 it knocked earlier on Wednesday and 2 cents below the April poll consensus forecast. In February's poll the euro was seen at $1.40 in a year.

The poll saw cuts across the board for one-, three-, and six-month forecasts with fears about contagion in the euro zone gripping investors.

The one-month forecast was cut to $1.32 from $1.34 last month while the six-month forecast dropped to $1.29 from $1.32. The euro has fallen almost 9 percent from an intraday peak for the year of just under $1.46 struck in January.

"Our outlook for the euro remains negative. We recently adjusted our euro forecasts, essentially pulling our already-weakening euro forecasts a quarter forward while looking for additional weakness in 2011," said Meng Jiao at BofAML.

"The current Greek debt crisis has made explicit the core problems within the euro zone -- having a common currency and monetary policy but very different fiscal and labour market policies."

European finance ministers triggered a record 110 billion euro ($147 billion) bailout for debt-stricken Greece on Sunday after Athens committed itself to years of painful austerity measures.

Investors fear the country's economic woes may spread to other vulnerable euro zone members such as Spain and Portugal. But a Reuters poll last week gave only a median 9 percent chance that Greece would leave the 16-nation bloc.

POUND STAMP ON EURO

In the second half of last year the euro zone economy emerged from its worst post-war recession but is expected to do little more than tick over in coming quarters.

Economists polled by Reuters earlier this month expected the bloc's economy to grow 1.0 percent this year and 1.5 percent next. Consensus predictions showed inflation will remain below the ECB's two percent target ceiling until at least 2012.

The European Central Bank is not expected to move rates from their record low of 1.0 percent until next year at the earliest to maintain the muted growth path which contrasts far more buoyant growth expected in the United States.

"Upbeat fundamentals leave the dollar with the upper hand -- at least in the short term," said Niels Christensen at Nordea.

Against sterling the euro was seen losing ground as the Bank of England unwinds its loose policy and begins to raise rates earlier than the ECB.

Cross rates calculated by Reuters show it trading at 87 pence in one month and then weakening to 85 pence in a year. The currencies nearly reached parity at the end of 2008 but economists gave only a 10 percent probability they would do so again within six months.

Euro volatility against the dollar was seen rising to 10.7 percent over the coming month, compared to actual volatility of 9.8 percent last month. Analysts say the divergence of forecasts in Reuters currency polls offers a leading indicator of exchange rate volatility in the following month.

(Polling by Bangalore Polling Unit; editing by Stephen Nisbet)