(Reuters) - The euro eased against the yen on Tuesday in choppy trading, pressured by a disappointing Italian debt auction that saw borrowing costs soar and conflicting reports about fresh euro zone support for debt-laden Greece.

The dollar and yen, meanwhile, were well-bid overall on safe-haven flows, rising against currencies that thrive when there is increased risk appetite, such as the Australian dollar and Norwegian crown.

Rumors and news about Greece were the key drivers in the euro. France on Tuesday confirmed an earlier report that Greek, German, and French leaders would hold a conference call on Wednesday. The news boosted the euro against the dollar, although few traders believed the rally could be sustained.

That report followed a denial by France its President Nicolas Sarkozy and German Chancellor Angela Merkel would make an announcement about Greece on Tuesday, which confused traders eager to latch onto any near-term trend in the euro and triggered volatile price action.

We are back to watching headlines and it seems like there are more rumors than fact, said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.

In general, it's still a very cautious backdrop and it's hard to see a sustained back-up in the euro and even for that matter a sustained back-up in European stock markets, he said.

Traders said the euro's bearish outlook was unchanged and real money remained a seller on rallies, with small sell-stop orders clustered around the $1.3720/25 level.

The euro last traded at $1.36770, flat on the day. It earlier hit a session low of $1.35578, when Market News International reported China may not buy Italian debt, countering an earlier report from the Financial Times.

On Monday, the euro had fallen as low as $1.34949, its weakest since February.

The single euro zone currency fell to the day's lowest levels at 104.410 yen before moving back to 105.120, down 0.5 percent and off a 10-year trough of 103.900 yen hit on Monday.

Pressure on the euro mounted after Italy paid higher borrowing costs to sell a new five-year bond.

Euro stress was also being triggered by persistent talk French banks could be downgraded by ratings agencies. Moody's Investors Service in June put French banks on review for a possible downgrade.


Key levels on the downside in the euro are now the February low around $1.34280 and the 50 percent retracement of the euro's June 2010-May 2011 rally around $1.34082.

The dollar slid from Monday's seven-month high of 77.784 against a currency basket to trade 0.7 percent lower at 77.051.

Wobbly risk appetite may provide some underpinning for the dollar, if only because the pool of viable 'safe havens' is slowly shrinking, said Shaun Osborne, chief currency strategist at TD Securities in Toronto.

In times of heightened uncertainty, the risk of holding liquid dollar assets is often seen as less risky than the alternatives, he added.

Against the yen the dollar eased 0.4 percent to 76.893 yen. The U.S. currency has held in a slim range roughly between 76.40 and 77.60 yen with markets wary of more yen-weakening intervention by Japanese authorities.

The euro was little changed against the Swiss franc at 1.20350 francs, hovering above the 1.2000 level at which the Swiss National Bank has vowed to rein in the franc.

The Australian and New Zealand dollars both struggled against their U.S. counterpart, while the Norwegian crown remained weak, trading down around 0.3 percent against the dollar at 5.6425 to the greenback.