TOKYO: The euro was supported by buybacks against the dollar in Asia on Tuesday after renewed worries about the eurozone sent the single currency to three week lows, dealers said.
The European unit traded at $1.3510 in Tokyo morning trade, up from $1.3486 in New York late Monday. The euro rose to 112.50 yen from 112.38 yen.
The dollar moved narrowly versus the yen, fetching 83.27 yen compared to 83.29 yen late in New York.
Markets were waiting for the outcome of a Bank of Japan policy meeting in which the central bank was expected to maintain it’s near zero rate and take no further easing steps, but may raise its assessment of Japan's economy.
Euro selling had been spurred by caution ahead of a Eurogroup meeting of finance ministers in Brussels.
Eurozone leaders decided Monday to almost double the effective lending capacity of future bailout funding, amid renewed pressure from the bond market.
A permanent eurozone rescue fund being set up from January 1, 2013, will have an initial capacity of 500 billion euros, said the head of the Eurogroup, Luxembourg Prime Minister, Jean-Claude Juncker.
The European Stability Mechanism will replace an existing 440-billion-euro eurozone fund already tapped by Ireland, but which has an effective lending capacity estimated at only around 250 billion euros.
Speculation over the possible breakup of the troubled German regional lender WestLB spurred euro selling late Monday.
"The problem of WestLB rekindled worries over eurozone financial woes," said Nobuaki Tani, dealer at Resona Bank. "Although the undertone for the euro is still weak, the unit was bought back for now on demand at levels below 1.35."
WestLB is under pressure because of faltering restructuring efforts, rekindling fears about the continent's banking sector.
The owners of WestLB and the federal government must submit a restructuring plan to the European Commission Tuesday.
The market showed limited reaction to China's closely-watched inflation data announced in the morning.
China said figure remained high at 4.9 percent in January, but was lower than some forecasts.
The consumer price index, the key gauge of inflation in the world's second-largest economy, was higher than the 4.6 percent in December but lower than November's 5.1 percent, which was a two-and-a-half-year high.
"The figure gave little immediate impact but was slightly positive for stocks as it indicated fast-pitched monetary tightening would be unlikely and thus would not impact the current upward trend of the stock market," Tani said.
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