* Euro turns lower vs dlr, 1-1/2 cents below day's high
* Dollar index off 16-mth low but still weak
* USD below 200-day MA vs yen; Fed seen staying put on QE2
(Recasts, adds quote)
By Jessica Mortimer
LONDON, April 14 (Reuters) - The euro turned lower against the dollar on Thursday, dented by speculation that Greece and possibly Ireland may be forced to restructure their massive debts, pushing peripheral euro zone bond yields higher.
Re-emerging concerns about debt problems in peripheral euro zone countries pushed the euro down as low as $1.4365
Analysts expected falls to be limited, however, with the euro still supported by expectations for higher euro zone interest rates while U.S. policy stays loose.
Traders said the fall below $1.4450 triggered stop-loss orders and accelerated selling after it had earlier failed to test Wednesday's 15-month peak of $1.4521 and an options barrier at $1.4530. It was last down 0.4 percent at $1.4388.
"The market tends to react to reports like this when the euro is at overstretched levels and this leads to some consolidation, but overall the medium-term trends are likely to stay in place," said Stephan Maier, currency strategist at Unicredit.
"For the euro to get to $1.42, the level before last week's ECB rate hike, we would need some dovish news from the ECB or an extremely bullish U.S. PPI number".
Support was seen around $1.4250-80, the base formed before last week's euro zone rate hike pushed it higher.
Greece's debt costs surged after Germany said for the first time that Athens may need to restructure its debt, a move European Central Bank Executive Board member Lorenzo Bin Smaghi warned would be a "catastrophe". [ID:nLDE73D0XQ]
ECB policymaker Juergen Stark also warned Irish banks they cannot rely on ECB emergency funding indefinitely. [ID:nWLA8110]
DOLLAR/YEN WEAKER
The dollar stayed not far from an earlier 16-month low against a currency basket after U.S. retail sales data and the Fed's Beige Book report on Wednesday kept intact expectations the central bank's $600 billion asset-buying programme would stay in place until June.
The dollar index <.DXY> was up 0.1 percent at 75.086, having earlier fallen to 74.617, bringing its losses this year to around 5 percent. The next target is seen at 74.17, the low hit on Nov 26., 2009.
U.S. producer prices data is due at 1230 GMT, but its impact
was expected to be limited.
The dollar fell against the yen, trading down 1 percent at 83.04 yen
One trader cited real money offers above 83.50 yen with further falls likely to target the 100-day moving average at around 82.72 yen.
"The dollar will continue to be undermined by the monetary policy stance of the Fed," said Adam Myers, senior currency analyst at Credit Agricole.
Goldman Sachs in a monthly report kept its forecasts for dollar/yen unchanged, with the pair seen rising to 90 yen in 12 months. Overall, Goldman remained bearish on the dollar with the U.S. bank targeting euro/dollar to rise to $1.50 in 12 months.
In contrast to the loose Fed policy, the European Central
Bank is expected to follow up its April interest rate hike with
more tightening later this year. Markets are pricing in a better
than 50 percent chance the ECB will hike in August.