* Euro falls more than 1 percent, breaches $1.39 support
* ECB's Trichet: "intensified downside risks" to growth
* Fed Bernanke offers no new details on easing options
(Updates prices, adds U.S. dollar index)
By Wanfeng Zhou
NEW YORK, Sept 8 (Reuters) - The euro fell to a two-month low against the dollar on Thursday after the European Central Bank signaled a pause in its interest-rate tightening cycle that began just five months ago.
The euro area economy is subject to "intensified downside risks," ECB President Jean-Claude Trichet said in a press conference after the ECB left rates at 1.5 percent, marking a significant change in stance from last month when the bank was focused on inflation risks. For details, see [ID:nL5E7K80SP]
Trichet's comments had pushed the euro down more than 1 percent against the dollar. Losses deepened after Federal Reserve Chairman Ben Bernanke offered no details of potential easing measures to boost a flagging U.S. economy, which encouraged some dollar bulls. See [ID:nW1E7IR02M]
"We haven't heard anything that moves the debate about (a third round of quantitative easing) forward. So in that respect, there's perhaps a diminished chance that we will see any Fed action at this month's policy meeting," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The euro fell as low as $1.38750
It last traded at $1.3885, down 1.5 percent on the day. The euro also lost 1.4 percent against the British pound to 86.97 pence
Trichet "is definitely signaling neutrality, but in that couching language of maybe accommodative monetary policy, if GDP turns negative," said Boris Schlossberg, director of currency research at GFT in Jersey City, New Jersey. "There is no more tightening in the foreseeable future as the economic data has definitely deteriorated."
Money markets are pricing in a chance of a rate cut by the
ECB as early as October as the European debt crisis shows no
sign of relenting and the global economic outlook deteriorates.
Graphic on interest rate expectations
http://link.reuters.com/pej23s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EURO DOWNSIDE
A close below its 200-day moving average, currently around $1.4023, should signal further declines in the euro/dollar, traders said. The pair broke and closed below this level on Tuesday. The next key downside target lies at $1.38376 on EBS, the euro's low set on July 12.
Greece on Thursday reported its economy shrank 7.3 percent in the second quarter from a year ago, highlighting the difficulties indebted countries face in trying to reduce their deficits. [ID:nL5E7K80RJ]
The bickering and policy disagreements among the 17 member countries in the euro zone has even given rise to concerns among some investors the bloc may eventually break up, traders say. Greece on Thursday ruled out quitting the euro.
Sterling slipped 0.2 percent to $1.5966
Against the yen, the dollar rose 0.3 percent to 77.46
The dollar rallied 2 percent to 0.8749 Swiss franc, after hitting a 3-1/2-month high of 0.87704 franc
The franc has been under pressure after the Swiss National Bank on Tuesday imposed a floor on euro/Swiss franc at 1.2000. The euro rose 0.4 percent to 1.2145 francs
Against a basket of currencies, the dollar index jumped 1 percent to 76.246 <.DXY>. (Additional reporting by Nick Olivari and Steven C. Johnson; Editing by Andrew Hay)