The euro rebounded on Wednesday after two days of steep losses, but investors remained worried about the global recovery and concerned the European Central Bank may be pulling back emergency funds too quickly.

The Swiss franc pared gains against the euro after Hungary said it was eyeing a new precautionary standby agreement with the International Monetary Fund for 2011.

The move alleviated some concerns about Hungary's large stock of franc-denominated debt.

Flows related to the end of the month, quarter and half year may also exacerbate price movements in thin trade, traders said.

By 0732 GMT, the euro edged up 0.3 percent to $1.2221, still not far from a two-week low near $1.2150 struck the previous day.

Traders cited some Asian sovereign demand below $1.2200.

Chartwise, it needed to hold above $1.2145-55 and then $1.2110 to avoid a slide toward its four-year low at $1.1876.

Focus is on a three-month tender by the European Central Bank on Wednesday ahead of the expiry of a 12-month operation on Thursday when euro zone banks must repay 442 billion euros.

A large take-up at the three-month tender would indicate many banks were still reliant on the central bank lifeline. Spanish, Portuguese and Greek banks have been the largest users of the ECB's lending facilities.

Investors were also keeping an eye on the German presidential election on Wednesday.

We don't expect any surprises, but if it goes into a second or third round, it would raise questions about German Chancellor Angela Merkel's political support and weigh on the euro, said Antje Praefcke, currency strategist at Commerzbank.

That concern along with the ECB expiry are negative risks for the euro, she said.

The euro has support at $1.2145-55, a pivot area stemming from intra-day lows and highs in May and June, and then at about $1.2110, the 61.8 percent retracement of its move up from $1.1876 to near $1.2500 in June.


Against the yen, the euro rose 0.4 percent to 108.31 yen, after hitting an 8-1/2 year low of 107.30 yen on trading platform EBS on Tuesday.

Against the Swiss franc, it clawed 0.4 percent higher to 1.3240 francs after hitting a lifetime low of 1.3165 on Tuesday. It is down nearly 11 percent on the franc this year.

The dollar was steady at 88.63 yen, having lost nearly 1 percent on Tuesday as the rush to safety pushed U.S. two-year Treasury yields to record lows.

The market was generally short, with stop-losses seen around 89.50 yen.

Support is seen at around 88.00 yen, the low struck on May 6, with one dealer citing talk of options in the 87.95-88.15 yen region due to expire later on Wednesday.

Traders will also keep an eye on U.S. ADP employment report ahead of nonfarm payrolls data on Friday. A higher-than-expected reading may give the dollar a lift after a slew of poor economic data recently.

The dollar index .DXY was flat at 86.018, with resistance expected in the 86.42 to 86.48 region. The latter is the 38.2 percent of the index's decline from a high of 88.71 to its recent low of 85.09.

The Australian dollar gained 0.8 percent on the dollar at $0.8508 after falling more than 2.5 percent in the previous session.

(Additional reporting by Charlotte Cooper in Tokyo, Editing by Sonya Hepinstall)