FOREX-Dollar firm but lacks punch, euro drifts at lows
* Dollar above 84 yen but lacks pep for move higher
* Euro eyes bottom of range at $1.3164 after support breaks
* EU summit not seen offering solution to debt crisis
TOKYO, Dec 16 (Reuters) - The euro steadied on Thursday ahead of an EU summit but looked vulnerable to further falls, while the dollar held near the top of recent ranges against several major currencies but lacked energy to vault them.
Trading conditions have become choppy as the year-end approaches, making it hard to take directional bets, although a surge in U.S. yields has boosted the dollar across the board, and took it to a three-month high of 84.51 yen JPY= on Wednesday.
Treasury prices edged up on Thursday and the dollar paused, helping the euro hold just above the bottom of a range it has kept since the start of the month, ahead of an EU summit set to discuss the euro zone debt crisis.
"The move above 84.41 yen should be a bullish sign for the dollar/yen but it does depend on U.S. yields," said Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo.
"The euro area still faces peripheral problems ... If contagion spreads to Portugal, then who's next?"
Euro zone graphic package: r.reuters.com/hyb65p
More on euro zone debt: [ID:nLDE6T0MG]
The euro's decline has been compounded by more upbeat U.S. economic data, which helped drive benchmark 10-year Treasury yields to seven-month highs at 3.565 percent and powered the dollar higher.
EU leaders meet in Brussels on Thursday and Friday for their end-of-year summit, with efforts to overcome the region's year-long debt crisis at the heart of their agenda.
Leaders will try to agree the next step in dealing with the debt crisis and how to stop it spreading. They will discuss changing the EU's treaty to create a permanent crisis-resolution mechanism from 2013 and might look at enlarging the existing crisis fund. For preview see [ID:nLDE6BE29I].
"We expect plenty of contradictory headlines. Hence, the euro is now vulnerable to a renewed move lower, with a break below initial support at $1.3170 likely to trigger a decline to recent lows in the $1.2970 area," BNP Paribas analysts wrote in a client note.
"With continued pressure on peripheral spreads, today's Spanish bond auction will be important for sentiment."
Spain, which rating agency Moody's warned on Wednesday could be downgraded, is scheduled to sell up to 3 billion euros of 2020 and 2025 bonds on Thursday.
RBC analyst Sue Trinh said those maturities were typically well subscribed, but at a price.
"At the margin, it may be euro-positive," she said.
The euro was flat on the day at $1.3215. Other chartists put key support for the bottom of the range at $1.3160-65 and say with a drop through there, the next level to watch is $1.3050-75 and then the November low at $1.2969.
Dollar/yen was steady at 84.24 yen JPY=, after pushing up through resistance at 84.00 yen on Wednesday. There was some talk of Japanese corporate selling at the higher levels.
A convincing break of 84.50 could bring the dollar into sight post-intervention peaks near 86.00 yen set in September.
The dollar index rose more than 1 percent overnight to above 80.00, but was flat at 80.23 on Thursday .DXY=USD.
Yet, the sharp rise overnight has only brought the dollar index towards the top-end of a wide range around 78.80-80.50 seen in the past few weeks as thin conditions made for choppy moves.
Commodity currencies such as the Australian dollar faded against the stronger dollar. The Aussie was last at $0.9870 AUD=D4, well off one-month high of $1.0030 set earlier in the week. (Additional reporting by Ian Chua in Sydney, contributions by Reuters FX analysts Krishna Kumar and Rick Lloyd; Editing by Joseph Radford)