FOREX-Euro choppy, yen struggles to hold its ground
* Euro briefly slips to two-week lows at $1.3325
* Yen's downtrend still intact, BOJ in focus this week
* Trading seen choppy with most of Asia shut for holidays
By Ian Chua
SYDNEY, Feb 11 (Reuters) - The euro dipped to a two-week low in Asia on Monday, continuing to pull back from 15-month highs following what markets perceived as slightly dovish comments from the European Central Bank and political uncertainty in Italy and Spain.
The embattled yen has found some support since Japanese Finance Minister Taro Aso said the currency has weakened more than intended following its recent eye-watering slide.
But with much of Asia shut for the Lunar New Year holidays, thin liquidity is likely to make for a very choppy session. Japan, China, Hong Kong, Singapore, South Korea and Taiwan are among the major centres in the region closed on Monday.
The euro briefly plumbed $1.3325 after stop-loss selling was triggered below $1.3340, traders said. It has since recovered to $1.3369, little changed from where it closed in New York on Friday.
Since hitting a 15-month high of $1.3711 on Feb. 1, the single currency has shed about 2.5 percent. Last week, ECB President Mario Draghi kept alive expectations of rate cuts should the euro strengthen further, saying the bank would monitor the economic impact of a rising currency.
There are also growing worries about Spain as a scandal on secret cash payments engulfed the prime minister, while confidence in Italy has been shaken in the run-up to the Feb. 24-25 election.
A strong campaign by former Prime Minister Silvio Berlusconi has opened up the race and threatened the prospects of a stable government emerging after the vote.
"The euro's upside is likely to be limited and short-lived. Better financial conditions are likely to be offset by rising political risks, market positioning and a weaker economy. We expect the euro to be on a declining trend beginning in Q2," said Aroop Chatterjee, analyst at Barclays Capital.
Against the yen, the euro traded at 123.57, holding near Friday's one-week trough around 123.43. The dollar was at 92.46, having plumbed a near one-week low of 92.17 Friday.
In the past months, trading in the currency had been an easy one-way bet as Prime Minister Shinzo Abe put intense pressure on the central bank to take bold action to revive the fragile economy.
But this week is shaping up to be trickier as several event risks loom, not least the Bank of Japan's policy meeting on Thursday.
The BOJ is expected to keep monetary policy steady ahead of the G20 meeting this weekend, particularly given that Japanese authorities have come under international criticism for allowing the yen to weaken.
There are also signs that Abe's push for a governor who will lead a radical policy shake up at the BOJ is meeting resistance from his own cabinet and financial bureaucrats.
"The upcoming G20 is causing some moderation in verbal encouragement from Japanese authorities, and the market will hold back for further signals from the BOJ at the MPC and on BOJ Governor Shirakawa's replacement," analysts at Deutsche Bank wrote in a client note.
"That said, we think dips are likely to be shallow, as laggard buyers will be opportunistic and policymakers will surely be loathe to surrender a handle in the 90s."
Not to be outdone by the euro and yen, the Australian dollar also experienced some volatility of its own last week after the Reserve Bank of Australia left the door open to more interest rate cuts if needed to boost the economy.
It skidded to a three-month low around $1.0256 on Friday, before popping back above $1.0300. It was last at $1.0315 .
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