FOREX-Euro extends fall to 12-year low as bond yields drop further

* Euro down broadly, hits 12-year lows vs USD

* Euro zone bond yields fall to lows two days into QE

* China data next in focus

By Ian Chua

SYDNEY, March 11 (Reuters) - The euro fell to a fresh 12-year low early on Wednesday, extending a broad decline just days after the European Central Bank kicked off its 1 trillion euro bond-buying program.

The ECB began printing money to buy sovereign bonds on Monday with a view to supporting growth and lifting euro zone inflation from below zero. Yields on the debt of nearly all euro zone countries dropped to record lows overnight.

German 10-year yields have dropped to 0.237 percent , down about 16 basis points so far this week. The two-year bond offer a negative yield of 0.235 percent .

The euro slid to $1.0666, extending Tuesday's 1.4 percent drop to lows not seen since April 2003. The latest decline has opened up the way to the 2003 trough of $1.0501.

It hit a seven-year low against sterling at 70.79 pence and touched an 18-month low versus its Japanese peer at 129.48 yen.

The common currency has been pressured by persistent uncertainty about cash-strapped Greece, due to resume talks with creditors in Brussels later in the day. Many are worried that Greece could exit from the euro zone. Italy's Economy Minister has warned this outcome should be avoided.

The dollar has been buoyed by expectations that the Federal Reserve could lift U.S. interest rates by the middle of this year. The dollar index has soared to its highest in more than 11 years at 98.776, closer to the 100.000 big figure.

The dollar reached parity against the Swiss franc and hit a near eight-year high of 122.04 yen. The greenback has since retreated to 121.15 yen, partly as U.S. Treasury yields were dragged lower by their European counterparts.

"With key USD pairs rapidly overtaking many forecasts once viewed as aggressive and hitting established trading targets, many market participants are unsurprisingly questioning whether moves have been excessive and could be prone to correction," analysts at BNP Paribas (Xetra: 887771 - news) wrote in a note to clients.

"We remain long USD, continuing to target 1.05 in EURUSD and 125 in USDJPY."

Among commodity currencies, the Australian dollar slumped to a six-year trough of $0.7603.

In a speech early on Wednesday, Reserve Bank of Australia Assistant Governor, Christopher Kent, said the fall in the local dollar was starting to help the economy.

The market was waiting for Chinese retail sales and industrial output data due around 0530 GMT.