* Euro hits 7-mth low vs dollar on euro zone fiscal problems
* Dollar at six-mth high versus basket of currencies
* ECB rate decision due at 1245 GMT, rates seen on hold
* ECB's Trichet speaks 1330 GMT, may spark euro volatility
(Adds quotes, details)
By Neal Armstrong
LONDON, Feb 4 (Reuters) - The euro hit a seven-month low against the dollar, knocked by concerns over the fiscal health of peripheral euro zone countries ahead of a European Central Bank policy decision later on Thursday.
Worries over Spain and Portugal have increased as investors speculate the two countries may face similar debt problems to Greece [ID:nLDE6121AC]. Such concerns pushed the safe-haven dollar to a six-month high versus a currency basket.
The euro <EUR=> hit its lowest level versus the U.S. dollar since June 2009 at $1.3827, according to Reuters data, with analysts expecting the single European currency to remain under pressure.
"The euro remains vulnerable and the market has now turned its attention to Spain and Portugal. Rallies have been short-lived and I am targeting a move towards $1.3745 in the short-term," said BNP currency strategist Ian Stannard.
Traders said moves in the euro could become volatile should ECB President Jean-Claude Trichet make any strong reference to fiscal problems in the euro zone. He will speak after a policy meeting at which the ECB is widely expected to keep interest rates on hold. [nLDE6110RC]
At 1040 GMT, the euro was trading down 0.3 percent on the day at $1.3845. Weakness was attributed to widening in peripheral euro zone bond yield spreads over German benchmarks. [nL9934677]
"Euro/dollar continues to trade off euro zone CDS/bond spreads and looks vulnerable," said ING currency strategist Chris Turner in a note.
STRONG U.S. DATA
Traders sold the single European currency on the view that dismal finances in euro zone countries may hinder any economic improvements in the region, increasing the probability that the U.S. economy may recover faster.
Strong U.S. data this week supported this view ahead of non-farm payrolls numbers due on Friday. A Reuters poll estimates 8,000 jobs were added to the economy last month. [ID:nN03191018]
The dollar <.DXY> hit a six-month high of 79.715 versus a basket of currencies, trading well above its 200-day moving average. Technical traders said the next resistance was at 80.07, which would be a 38.2 percent Fibonacci retracement of its fall from 89.624 to 74.17 in 2009.
The New Zealand dollar <NZD=D4> hit a five-month low of $0.6939 after data showed the country's jobless rate rising to a 10-year high. [ID:nSGE6110KG]
The Australian dollar touched a six-week low of $0.8772 <AUD=D4> after Australian retail sales fell more than expected in December. [ID:nSGE6120NF]
Sterling was down 0.3 percent at $1.5845 <GBP=D4> before the Bank of England was expected to pause its quantitative easing programme at 1200 GMT. [ID:nLDE6122M4]
Risk-averse traders flocked to the yen, which pushed the dollar <JPY=> 0.5 percent lower to the day's trough of 90.59 yen. The euro <EURJPY=R> fell 0.8 percent to 125.50 yen. (Additional reporting by Masuyaki Kitano in Tokyo; Editing by Mike Peacock)