The euro fell on Thursday after weak Greek data reinforced concerns about weaker euro zone economies, while the yen pared losses versus the dollar as fears eased of immediate intervention by the Bank of Japan.
The single currency had risen in earlier trade on early signs that euro zone peripheral spreads were stabilizing after widening over the course of the week on concerns over Ireland's economy in particular.
But the euro pared gains and moved into negative territory after Greek gross domestic product came in below forecast and unemployment data posted a record jump, reinforcing concerns over peripheral euro zone economies.
The Greek data reinforces concerns that the Greek authorities may back away from austerity measures and move toward haircuts or even sovereign default, said Lee Hardman, currency analyst at BTM-UFJ.
The euro fell back to trade down 0.2 percent versus the dollar at $1.2809 after rising as high as $1.2932. It was testing the 100-day moving average at $1.2807.
The euro sell-off we've seen this week has been down to concerns about the peripheral euro zone economies, said Jane Foley, research director at Forex.com. But I think that move is temporary and the strength of the recovery in Germany is more important for the euro.
INTERVENTION FEARS EASE
The dollar had bounced against the yen in early trade, aided by market sources telling Reuters the Bank of Japan checked exchange rates with banks earlier on Thursday.
But subsequent comments from Japanese Finance Ministry Yoshihiko Noda at a specially arranged press conference eased immediate fears of intervention.
The market is somewhat disappointed that nothing significant came out of the Noda press conference on the policy front. His comments were largely neutral, said Hardman at
Noda said the government is sharing information on currencies with officials in the United States and other countries after the yen jumped to a 15-year high versus the dollar. But he added Group of Seven finance ministers have no plans to hold a conference call about turbulence in currency markets.
Movements in currencies are too far removed from Japanese fundamentals to justify intervention. It's more about Federal Reserve policy, said Foley at Forex.com.
The dollar was trading close to flat versus the yen at 85.35 yen after rising as high as 85.82 in early trade. It stayed close to a 15-year low hit on Wednesday at 84.72, in a move driven largely by a narrowing spread between U.S. and Japanese government bond yields.
The dollar rose 0.4 percent versus a basket of currencies to 82.621 after posting its biggest one-day gain in two years the previous day when concerns about the U.S. and global economies triggered a wave of unwinding in short dollar positions.
(Editing by Patrick Graham)