LONDON, June 18 (Reuters) - The euro held at three-week highs on Friday, on track for its second successive week of gains, while the dollar appeared vulnerable to further losses after falling below a key chart level.

The dollar fell after a slew of below-forecast U.S. economic data, which helped push U.S. Treasuries yields to their lowest in a week.

The euro held gains near $1.24 as investors shed short positions after solid demand at Spanish government bond auctions the previous day, easing concerns about Spain's debt-servicing abilities and boosting sentiment for riskier assets.

Financial system concerns have eased, and some players are re-establishing carry trades, seeking higher-yielding assets, said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

The euro EUR= rose as far as $1.2414 on trading platform EBS. By 0733 GMT, it was up 0.1 percent at $1.2387.

The single currency has gained more than 2 percent so far this week, pulling further away from a four-year low of $1.1876 struck on June 7.

The euro remains upside corrective and on track to test the $1.2445 2009 low and inter-year pivot, technical analysts at Commerzbank said.

This together with the 38.2 percent retracement of the move down from April represents our initial corrective target.

European leaders agreed on Thursday to publish details of stress tests showing the financial health of individual banks next month and to toughen budget rules to restore confidence in their currency union.

Some in the market said the release of stress tests would boost investor trust in European banks but others were concerned they could reveal fragility in the sector and hurt the euro.


The dollar took a hit after a rise in jobless claims, weaker-than-expected manufacturing data and a big drop in consumer prices on Thursday prompted investors to scale back expectations of a U.S. Federal Reserve interest rate hike.

The dollar index .DXY was at 85.57, down 0.1 percent after brushing a one-month low at 85.491. Technically, it looked vulnerable after it broke through support at 85.85, with the next key level seen in the 85.13 area, its May 21 low.

Sterling hit a one-month high against the dollar GBP=.

A number of currency pairs are at a critical juncture near range highs, analysts at RBC Capital Markets said in a note.

Will they respect the range, or will they see technical breakouts? In this regard, the key level to watch is the dollar index, which needs to hold above 85.00 to prevent a larger liquidation of stale longs.

The dollar was marginally lower against the yen at 90.78 yen JPY=, having fallen 0.5 percent in the previous session after the weaker-than-expected U.S. data.

The Swiss franc CHF= was also firm after Switzerland's central bank on Thursday backed away from its pledge to fight excessive currency strength now that deflation risks have receded.

The dollar hovered near a one-month low of 1.1095 francs. The euro was slightly lower EURCHF= at 1.3757 francs, not far from a record low of 1.3735 on EBS hit on June 9.

(Additional reporting by Satomi Noguchi in Tokyo)