Euro holds firm, eyes on US jobs report

TOKYO, Aug 3, 2011 (AFP) - The euro was in focus in Asia Wednesday amid signs of debt contagion in the eurozone and fears about the outlook for the US economy while dealers were also looking to Japan's reaction a strong yen.

The euro, which fell overnight on fresh worries over the eurozone, held firm against the greenback in Asian afternoon trade, fetching $1.4208 in Tokyo against $1.4202 in New York late Tuesday.

The euro traded at 109.74 yen against 109.51 yen.

The single currency resisted further falls in Asia as investors took their cue from positive China share prices that boosted investor risk appetite, said Tokyo Forex and Ueda Harlow senior dealer Yuzo Sakai.

"Amid a relatively-quiet market, we see some risk-on moves stemming from firm Chinese share prices," he told Dow Jones Newswires.

The dollar was flat at 77.16 yen, compared to 77.14 yen in New York.

In bond markets overnight, concern was focused on Italy and Spain with spreads between yields on their sovereign bonds and those of Germany hitting record levels, dampening hopes that the eurozone debt crisis may soon be over.

Investors sold down Spanish and Italian bonds on concerns that their debt problems would only get worse as economic growth slows.

The greenback earlier saw modest gains against the euro on news Moody's Investors Service affirmed the US's Aaa rating after Congressional leaders struck an 11th-hour deal to avert a default on US government debt obligations.

But a downbeat consumer spending report overshadowed the passage of the debt-ceiling deal in Congress on Tuesday.

Under the agreement reached by President Barack Obama and top lawmakers, the US government's debt limit will be increased by about $2.4 trillion in two steps while Washington also makes deep spending cuts.

The cuts are also predicted to weigh on US growth.

"US data released overnight continued to show the weak state of the nation's economy," said Tomohiro Ishikawa, dealer at Chuo Mitsui Trust and Banking.

"But it is difficult to sell off the dollar against the yen amid caution over Japanese authorities' possible intervention," Ishikawa said.

The dollar steadied against the yen after the greenback dropped as low as 76.29 earlier this week, just a little off its post-WWII low of 76.25 yen on March 17.

Japanese authorities have stepped up their rhetoric in recent days in an attempt to talk down the yen using the threat of market intervention, although analysts say such a move would not have a lasting impact as the unit's strength is due to the weakness of other currencies.

Market participants said they are keeping tabs on upcoming US jobs data due later in the day from payrolls firm ADP ahead of Friday's government employment report for July.

The dollar was higher against other Asian currencies.

It edged up to Sg$1.2082 from Sg$1.2024 on Tuesday, to 1,058.90 South Korean won from 1,051.30, to Tw$28.88 from Tw$28.84, and to 42.29 Philippine pesos from 42.07.

The dollar also rose to 8,475.00 Indonesian rupiah from 8,460.00 and to 29.77 Thai baht from 29.72.

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