TOKYO, May 27 – Pressure on the euro eased on Thursday as it saw moderate gains against the dollar and yen in Asian trade, but risk appetite was constrained by persistent eurozone fears.
The single unit advanced to 1.2263 dollars in Tokyo afternoon trade after falling sharply to 1.2175 in New York late Wednesday on fears of contagion from the debt crisis that has rocked the eurozone.
The single currency fetched 110.58 yen from 109.46. The dollar rose to 90.17 from 89.98 yen.
However, the euro\’s gains Thursday would be short lived, analysts warned.
"As the eurozone issue is shifting from Greece to the Spanish financial sector and fiscal problems, the euro is likely to keep declining against the dollar," Barclays Capital said in a note to clients.
"The European monetary authorities are seen to give a quiet nod to the current level of the euro, while the Japanese authorities are not poised to make preventive measures against the stronger yen," it said.
Some analysts have said a weak euro would assist a European recovery by making its exports cheaper versus those from countries with stronger currencies, helping to boost demand and drive growth.
However, the International Monetary Fund has warned Spain that its recovery would be "weak and fragile" with urgent labour and bank reforms needed.
IMF chief Dominique Strauss-Kahn on Wednesday urged EU countries to coordinate their national crisis recovery plans, notably by using part of a one-trillion-dollar EU-IMF stabilisation fund to boost growth.
The Spanish central bank at the weekend rescued CajaSur bank, heaping more pain onto the country\’s already strained finances.
The bailout of at least 523 million euros (657 million dollars) came as Madrid introduced new measures to cut its public deficit to a eurozone limit of three percent of gross domestic product from 11.2 percent last year.
Spain has already unveiled major belt-tightening measures in the wake of a Greek public debt crisis that has shaken confidence in that country and other debt-riddled eurozone members such as Ireland, Italy and Portugal.
The Korean won also showed signs of stabilising after seeing heavy falls against the dollar this week on heightened tensions between the North and South.
The greenback fell to 1,224 won from 1,253 late Thursday, amid speculation the Bank of Korea may have again moved in after a suspected two billion-dollar intervention Tuesday.
The dollar was weaker against other Asian currencies, falling to 9,258 Indonesian rupiah from 9,365 on Wednesday, to 32.16 Taiwan dollars from 32.25 and to 32.53 Thai baht from 32.55.
The greenback fell to 1.4051 Singapore dollars from 1.4104 and to 46.41 Philippine pesos from 46.79.