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Euro languishes against dollar

TOKYO, August 12 – The euro languished at six-month lows against the dollar in Asian trade on Tuesday as traders continued to focus on the deteriorating health of the eurozone economies, dealers said.

Falling oil prices also helped prop up the greenback, they said.

The euro was at 1.4898 dollars in Tokyo morning trade, unchanged from its level in New York late Monday.

The dollar rose to 110.27 yen from 110.10, remaining close to seven-month highs. The euro gained to 164.27 yen from 164.04.

"Market sentiment is focused on slowing growth in Europe," said Kenichi Yumoto, vice president of forex sales at Societe Generale.

In the latest gloomy report from the eurozone, French industrial output fell sharply in May and June, raising a risk that overall activity in the second-biggest eurozone economy might have contracted in the second quarter.

Expectations of an interest rate hike by the European Central Bank (ECB) have receded in light of recent weak eurozone economic data.

The euro gained little support from a warning by ECB council member Klaus Liebscher that there is "absolutely no room for complacency" on inflation.

The comments prompted some investors to square their sell positions on the euro, but investors soon returned to buying the dollar, said Yumoto.

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The ECB kept its lending rates steady last week at 4.25 percent, acknowledging worries about the health of the eurozone economies.

Traders were also monitoring a conflict between Georgia and Russia that has unsettled sentiment towards the euro.

But they largely ignored news that Japanese corporate goods prices in July shot up 7.1 percent from a year earlier on higher energy costs, rising at the fastest pace in more than 27 years.

Japan is expected to report Wednesday that its economy shrank in the second quarter, leaving the central bank with little room to raise interest rates to curb inflation, which is mostly due to soaring oil costs rather than domestic overheating, analysts said.

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