Euro rally fizzles in Asian trade

TOKYO: A euro rally fizzled in Asian trade Thursday after the beleaguered unit briefly rose on cautious optimism over the latest steps to battle Europe's debt crisis amid signs of further US stimulus.

The common currency bought $1.2140 and 94.87 yen in Tokyo morning trade, down from $1.2153 and 95.04 yen in New York late Wednesday.

The dollar changed hands at 78.14 yen against 78.10 yen in New York amid reports that the Federal Reserve may move on pumping more cash into the stuttering US economy.

The euro had won support Wednesday after Austrian central bank governor Ewald Nowotny, a member of the European Central Bank governing council, said an EU financial rescue fund might be granted a banking licence.

That would allow the fund, known as the European Stability Mechanism (ESM), to exchange bonds for ECB cash, bolstering its capacity without governments having to contribute additional funds.

"The bond markets have reacted quite buoyantly," HiFX senior trader Stuart Ive told Dow Jones Newswires.

The euro's gains lost steam in the absence of further details on the possible banking licence.

"We suspect the key for how FX behaves later today will be any follow-up comment from ECB officials on the question of a banking licence for the ESM," National Australia Bank said in a note.

The bank noted that ECB president Mario Draghi had earlier said the license would violate an EU treaty.