TOKYO: The euro held firm against the dollar and yen in Asian trade on Thursday after dropping overnight amid concerns about political upheaval in debt-hit Greece and strains on Spain's banking sector.
The euro bought $1.2948 and 103.28 yen in Tokyo morning trade, stronger than $1.2944 and 102.98 yen in New York late Wednesday. The dollar strengthened against the Japanese currency, changing hands at 79.74 yen against 79.69 yen.
Despite a breather in the euro's fall, a senior dealer at a major European bank in Tokyo said the common currency still had room to weaken given the continent's ongoing fiscal saga, and political uncertainty after French and Greek elections underscored a wave of anti-austerity sentiment.
"Given the problem hasn't fundamentally been solved, chances are still higher for the pair (euro-dollar) to fall further," he told Dow Jones Newswires.
Investors were wary after Madrid announced Wednesday it would take control of Bankia, the country's fourth-biggest listed bank, to shore up its balance sheet which is ridden with bad loans.
Also Wednesday, Greek political parties failed to form a viable coalition government amid warnings from creditors that a loan to be paid on Thursday could be the last if Athens fails to honour its reform commitments.
In Brussels, a European Union official told AFP that Greece would receive a 4.2-billion-euro loan as expected on Thursday, but a further 1.0 billion would be held back until Monday.
The dollar may trade around the 80-yen level in the near term as investors focus on Federal Reserve chairman Ben Bernanke's speech due later Thursday, said Masafumi Yamamoto, chief FX strategist at Barclays Bank in Tokyo.
"If there is no particular downward revision for the economic outlook and he doesn't suggest additional (monetary) easing in June, downside risk for the dollar recedes, supporting the dollar/yen," he said.
Currency rates hardly moved after data showed Japan's current account surplus halved in the year to March to 7.893 trillion yen, marking a record year-on-year fall on higher fuel costs and weak exports.