Euro hampered by Greece worries; China data eyed

A picture illustration shows a U.S. dollar bank note and a one Euro coin, taken in Warsaw January 26, 2011. Picture taken January 26.

SYDNEY (Reuters) - The euro wallowed at one-week lows against the dollar in Asia on Friday, having skidded a full cent as worries about Greece's debt problems dominated even after the European Central Bank hinted at a July interest rate hike.

Trading though is expected to be subdued in the lead-up to key trade data from China due later on Friday. Signs of a further cooling in the world's second biggest economy could fuel worries about global growth.

Traders said the euro's decline reflected a case of buy-the-rumor-sell-the-fact, adding the market had fully priced in a tightening in July in the lead-up to the ECB meeting.

Instead, the focus was on the ECB's staff projection of inflation holding at 1.7 percent in 2012, which traders said was lower than expected and suggested rate hikes could be slower than previously thought

Also worrying the market was the ECB's steadfast rejection of any form of debt restructuring for Greece in tackling its debt crisis, something that Germany, in particular, is in favor of.

"The conflicting views among the EU are likely to drag and headlines could potentially weigh on sentiment. Hence a EURUSD correction down to 1.4500/1.4450 should not surprise," analysts at BNP Paribas wrote in a note.

The euro last traded at $1.4513, having earlier fallen to a low around $1.4476. Good support is seen at $1.4419, the 38.2 percent retracement of the May 23 to June 7 rally.

The euro also lost ground against the yen, slipping to a one-week low just under 116.00 yen, before edging back to 116.55.

"All said and done, investor sentiment is such at the moment that the discord amongst euro zone policy-makers and their inability to move beyond stop-gap measures to contain the sovereign debt crisis continues to dominate investment decision-making," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon.

Not surprisingly, BNY Mellon's flows analysis showed investor demand for Greek, Portuguese, Spanish and Italian bonds remained out of favor.

With the euro on the back foot, the dollar bounced to a one-week high against a basket of major currencies. The dollar index .DXY rose as high as 74.297, well off a one-month low of 73.506 set earlier in the week.

Against the yen, the dollar edged up to a one-week high near 80.50. It last stood at 80.31 yen.

Despite a firmer greenback, the resilient Australian dollar drifted back above $1.0600 from a two-week low of $1.0563. It was last at $1.0628.

Still, the Aussie is down about one percent this week, hit by data showing a slowdown in employment growth and a statement from the central bank that was interpreted as showing no urgency in raising rates.

(Editing by Wayne Cole)