* Euro weighed down by worsening debt woes
* Aussie hits 1-month low on RBA, North Korea
* Dollar hits 7-week high vs yen, eyes 85 yen
TOKYO, Nov 26 (Reuters) - The euro fell to a fresh two-month low against a broadly recovering dollar on Friday as a relentless rise in euro zone countries' bond yields fanned worries over their debt financing.
The Australian dollar tumbled after the Australian central bank quashed chances of an imminent rate hike while the yen hit a seven-week low against the dollar, with fresh sabre-rattling by North Korea helping the U.S. currency.
"We've been hearing one piece of bad news after another from the euro zone lately. There's even talk of a breakup of the euro zone," said Tsutomu Soma, manager of foreign securities at Okasan Securities.
A majority of euro zone nations and the European Central Bank are urging Portugal to apply for a financial bailout from a European rescue fund, Financial Times Deutschland reported on Friday. [ID:nLDE6AO26F]
"I think Portugal has already crossed the point of no return. Its bond yield has gone beyond a sustainable level. The market is now watching whether Spain will need a rescue," said a Japanese bank trader.
The euro fell 0.6 percent to $1.3280 EUR=, having fallen as low as $1.3265, its lowest level since late September.
Traders believe the euro will have more opportunities to test the downside, with a break below the latest trough seen putting the single currency's trendline support at $1.3230 as the next target, followed by its 200-day moving average around $1.3135.
A break below the 200-day moving average could be seen as more evidence of medium-term weakness after its move below major support, including a 38.2 percent retracement of its rally from June to early November.
The euro's rally earlier this year was helped by the fact that the European Central Bank was seeking an exit strategy from its loose policy, in contrast with the Federal Reserve and the Bank of Japan, which have taken more easing steps in recent months.
But some market players said that may change soon.
"Because of the debt woes, euro zone countries will now have to tighten their fiscal policies, which will dent growth and put pressure on the ECB to give up its search for an exit sooner or later," said Daisuke Karakama, a market economist at Mizuho Corporate Bank.
"The ECB may say it will extend its offer of unlimited liquidity as early as its next policy meeting (next Thursday)," Karakama said. The ECB extended the measure to early 2011 in September. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TAKE A LOOK- Europe's debt problems [nLDE68T0MG] Euro zone debt struggle link.reuters.com/dah65q Multimedia on Euro zone crisis r.reuters.com/hus75h EU bailout graphic link.reuters.com/fac76q Euro zone debt graphic r.reuters.com/hyb65p Interactive timeline link.reuters.com/nyx95q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
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