* Euro hits two-month low versus dollar, five-week low vs
* ECB keeps rates unchanged, says growth to remain weak
* U.S. fiscal worries underpin safe-haven flows into dollar
By Wanfeng Zhou
NEW YORK, Nov 8 The euro fell to a two-month low
against the dollar on Thursday after the European Central Bank
kept interest rates at a record low and said the euro zone
economy shows little sign of recovering before the year-end.
In a press conference following the bank's decision to keep
rates at 0.75 percent, ECB President Mario Draghi also said
policymakers have not discussed plans for next year.
Recent weak euro zone data, which also showed weakness in
Germany, had prompted speculation that the ECB may ease policy
further before year end.
"The European economy needs to be revived. If the ECB will
not do it, who will? The euro will continue to weaken because
there is no recovery in sight for Europe and the rest of the
world continues to slip," said Joseph Trevisani, chief market
strategist at Worldwide Markets, Woodcliff Lake in New Jersey.
A media report that said Spain is edging away from asking
for aid this year also drove speculators, already positioned for
further weakness, to sell the shared currency aggressively.
Earlier this week, Prime Minister Mariano Rajoy said conditions
over a potential bailout were still being studied.
The euro slid to a two-month low of $1.2716 on
Reuters data, the weakest since Sept. 7, before recovering to
$1.2739, down 0.2 percent on the day. Traders said
option-related buying was noted ahead of $1.2700 barriers.
The euro also hit a near four-week trough against the yen,
dropping to 101.57 yen. The euro's losses helped take
the dollar index to a two-month high of 81.001.
German exports slid at their fastest pace since late last
year, figures showed on Thursday, adding to evidence that the
crisis has begun to inflict a heavy toll on Europe's largest
Investors were slightly encouraged by a Spanish bond auction
which indicated reasonably healthy demand, although any rebound
in the euro was seen as an opportunity to sell.
The euro fell to a five-week low against sterling at 79.605
pence and was last down 0.2 percent at 79.75 pence.
The Bank of England left interest rates and its asset purchase
The dollar index, which measures its performance against a
basket of major currencies, extended the previous day's gains,
as investors focussed on the "fiscal cliff" that is threatening
to push the U.S. economy into a recession next year.
About $600 billion in government spending cuts and higher
taxes will kick in early next year, unless U.S. lawmakers take
steps to reduce the deficit.
The dollar has been helped by safe-haven inflows due to
uncertainty stemming from the fiscal situation and some of those
long positions could be unwound if a resolution is reached.
The dollar slipped 0.2 percent to 79.87 yen, staying
below a six-month high of 80.67 yen set last week.