TOKYO: The euro was steady against the dollar in Asia on Friday as recent sell-offs on eurozone debt problems took a pause after Italian bonds attracted solid demand at a closely watched auction.
The euro was slightly down at $1.3586 and 105.43 yen in Tokyo trade against $1.3599 and 105.65 yen in New York late Thursday.
The dollar was almost flat at 77.60 yen compared to 77.65 yen.
Investors took heart from a successful Italian treasury bill auction on Thursday.
The yield on 10-year Italian bonds -- the interest rate Italy pays to borrow -- also fell below the 7.0 percent level seen as unsustainable for Italy to service its 1.9-trillion euro ($2.6-trillion) debt.
The rise in borrowing costs has fanned fears that Italy could be the next eurozone economy to be forced to seek a bailout in a debt crisis that has brought Greece, Ireland and Portugal to their knees.
With bond yields surging around danger levels, Italian Prime Minister Silvio Berlusconi has pledged to step down after parliament passes key reforms.
While the European Central Bank has helped prop up Italy's bond market there have been multiple warnings that Italy is simply "too big to bail".
In Greece, President Carolos Papoulias on Thursday asked former European Central Bank vice-president Lucas Papademos to form a new government, the head of state's office said.
Outgoing Prime Minister George Papandreou shocked the rest of Europe last week by announcing a referendum on Greece's EU bailout deal, sending markets worldwide into meltdown.
But Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ, expects more euro weakness ahead, saying uncertainty over Italian politics will likely weigh on the European single currency.
The euro bounced Thursday on the successful bond auction and the selection of Papademos as new Greek prime minister but "uncertainty remains high," she said.
Japanese finance minister Jun Azumi on Friday reiterated his warning against speculators driving the yen higher, which erodes Japanese exporters' overseas earnings and could dent the nation's post-quake recovery.
"I'm closely watching the market with interest, to see if there are speculative and excessive movements," Azumi said.
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