The euro fell to $1.3506 and 104.05 yen in Tokyo trade from $1.3536 and 104.31 yen in New York late Tuesday. The dollar was flat at 77.07 yen compared with 77.05 yen. Investors kept a wary eye on Europe after hikes in borrowing costs for Italy, Spain and France. Italy's 10-year cost of borrowing jumped back above the 7.0 percent level seen as unsustainable for the country to service its debt as prime minister designate Mario Monti vowed to unveil a new government Wednesday. Spain paid sharply higher rates of more than 5.0 percent on a new 3.16-billion-euro Spanish Treasury auction of 12 and 18-month bills, reflecting concerns that the country could be the next to seek a bailout. And the rate on the French 10-year bond rose sharply to 3.683 percent, making Paris pay more than twice as much as Germany to borrow. "Worries are not going anywhere as you saw French bonds being sold overnight," Mizuho Corporate Bank senior dealer Shuichi Kanehira told Dow Jones Newswires. Stewart Hall, Senior Currency Strategist at RBC Capital Markets, said: "The market tolerance for risk continues to be challenged by persistent upward pressure on both periphery and core eurozone yields." "In the absence of the ability to inflate their way out of the debt maze, slow growth, no growth and rising funding costs present EU policymakers with few options." The dollar got support from US retail sales data that showed a 0.5 percent rise in October from September, topping market forecasts and raising expectations for brisk Christmas shopping season and US economic recovery. The dollar may trade narrowly against the yen ahead of the Bank of Japan's policy announcement later in the day as some investors expect the central bank to take easing steps, said a senior dealer at a major bank. But the central bank is widely expected to leave monetary policy unchanged, according to economists.