* Near-term implied volatility in EUR/USD jumps ahead of Greek vote
* Austria's finance minister says Italy may need a bailout
* USD/JPY ensconced between offers and bids from real money players
* Trader looks to sell EUR/USD at 1.2525-50 if short-covering kicks in
By Antoni Slodkowski
TOKYO, June 13 The euro edged lower on Wednesday, t ethered to a familiar range with investors sticking to the sidelines ahead of an Italian bond sale the next day and a weekend vote in Greece that could determine the future of the euro zone.
The single currency took a breather after Spanish bond yields hit a euro-era peak as the decision to lend the country's ailing lenders 100 billion euro fuelled fears it will struggle to access debt markets as its own debts mount.
Further undermining confidence in the currency, Austria's finance minister said Italy may need a financial rescue because of its high borrowing costs and added that the euro zone's stretched funds may be insufficient to help Rome.
Against this backdrop, the euro edged 0.1 percent lower to $1.2493, b ang in the middle of its 2-year low hit on June 1 at 1.2288 and a three-week high reached on Monday at 1.2672.
"The euro is going to drift around $1.25 before the weekend," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
"It's also possible that even on Monday we may still know very little about who'll be in government in Greece. That's why we have to brace ourselves for more uncertainty ahead."
There was talk of sovereign players placing offers around 1.2520 and stop losses looming at 1.2530. Above that, resistance was eyed at the 21-day moving average around 1.2551. The average has not been decisively breached for the last 6 weeks.
As the euro zone crisis spreads across southern Europe, the common currency has fallen more than 7 percent from the peak of 2012 hit in February a n d few see the situation improving any time soon.
Concerns over the outcome of Greek elections, where parties opposing and supporting harsh austerity measures imposed by the country's international lenders are neck and neck in public opinion polls, caused many investors to remain on the sidelines.
The options market was positioning for the elections with 1-week euro/dollar implied volatility trading at the highest level since November at 15.9 percent as quoted by ICAP , up from 10.5 percent last Friday.
"One week implied volatility is hitting extreme levels. Many players are buying downside puts to protect themselves in case anti-bailout parties win the vote," said a trader for a Japanese bank.
"If that happens the euro could very quickly tumble below this week's low (at 1.2288) as short-term accounts would try to take out stops sitting below the level," he said.
The trader added that if the euro rose on short-covering he would sell into the rally around 1.2525-50.
FACING A TEST
Against the yen the euro was up 0.2 percent at 99.50 yen . Traders said Japanese exporters were likely to cap any gains in the currency around 100 yen.
They also cited worries about the logistics of the Spanish rescue and fears that private bondholders could be pushed down the repayment chain below official lenders, risking losses in any debt write-down, similar to Greece.
Meanwhile, Rome faces a test on Thursday, when it plans to offer up to 4.5 billion euros of fixed-rate bonds at its mid-month auction.
The dollar was a tad higher against the yen at 79.64 yen , hovering below this week's high at 79.92 yen. Crucial support was seen at 77.65 yen hit on June 1.
Traders reported offers around 79.70 yen from Japanese exporters and bids emerging around 79.20. Chart analysts were eyeing the 100-day moving average at 80.23 as the next resistance level.
The Australian dollar was also barely changed at $0.9948 , holding not far below its Monday high of $1.0010. It has a minor support around $0.9820, with resistance sitting at the peak reached above parity on Monday.
Australia's top central banker said the country's terms of trade were likely to remain high for a long time, thanks to strong ongoing demand for resources from Asia.