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The euro retreated from a five-month high versus the dollar on Thursday, stung by worry over Ireland's banking sector and a contraction in the Irish economy that underlined concern over the euro zone periphery.
Other data suggesting growth in the euro zone slowed in September helped knock the euro from a five-month high versus the dollar as it raised concerns about the region's recovery.
A 1.2 percent fall in second quarter Irish GDP from the first quarter confounded forecasts for a 0.5 percent rise and highlighted the struggles facing Ireland as it tries to shore up its banking sector.
"The euro downmove started even before the Irish GDP data, as the market is worried about Irish banking sector uncertainties," said Geoffrey Yu, currency analyst at UBS.
Ireland on Wednesday said there was no chance it or its ailing banks would default on its debt. The government has extended a guarantee for the short-term liabilities of its banks, while withdrawing guarantees on some types of bank debt at the end of the month.
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Pessimism about Ireland pushed yield spreads between 10-year government bonds in Ireland and Germany -- the most economically sound euro zone country -- to their widest ever.
At the same time, the five-year Irish credit default swap, or the cost to insure against the country's default, hit a record high of 500 basis points, helping push the euro to the day's low around $1.3310.
By 1116 GMT, it was down 0.6 percent on the day at $1.3322, well off $1.3441 hit on Wednesday, its highest since April, when the dollar came under broad selling pressure on speculation the Federal Reserve will implement more monetary easing soon.
Analysts said a weak euro zone purchasing managers' survey had cast doubt over the European recovery, helping the dollar recover from losses suffered earlier this week on the view that more quantitative easing would lead to a further depreciation in the U.S. currency.
A euro rise above $1.3400 in early European trade triggered by selling from Asian accounts, traders said, but it hovered above its 200-day moving average around $1.3208.
The euro also stumbled to session lows versus the yen, the Swiss franc and sterling, pulling away from a one-month high versus the yen EURJPY=R and a four-month peak against sterling EURGBP=D4 hit the previous day.
YEN SUBDUED
The dollar was steady at 84.40 yen after falling to 84.27 yen, its weakest since Tokyo intervened in the currency market last week for the first time in six years. Markets in Tokyo were closed on Thursday for a national holiday.
"The yen would be a lot stronger if not for intervention and the threat of intervention," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
