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Euro under pressure

Tokyo - Investors remained cautious in Asian trade on Monday with a comprehensive deal to protect the eurozone still not in sight, as attention turned to political change in Spain and a looming US debt showdown.

Investors are now awaiting direction from Spain’s new government following Sunday’s election that saw the conservative Popular Party inflict a heavy defeat on the ruling Socialist Party, analysts said.

The new leader, Mariano Rajoy "will need to implement some swift policy changes to calm markets with Spanish 10-year bond yields having climbed 70 basis points last week towards 6.50%," noted National Australia Bank's John Kyriakopoulos.

Rajoy's aim to promote jobs growth and deliver austerity measures to control the debt "looks a tough task," Kyriakopoulos added.

The euro traded at $1.3522 and ¥103.87 compared to $1.3519 and ¥104.00 late on Friday in New York.

While there were some encouraging signs from Greece and Italy on political acceptance of austerity programmes, European Central Bank chief Mario Draghi's blunt rebuff to suggestions that the ECB can supply rescue funds for the eurozone added a new layer of risk in the markets.

The dollar eased against the yen as concerns over a US agreement to reduce its fiscal deficit pressured the greenback.

The dollar slid to ¥76.80 in Tokyo trade from ¥76.93 in New York late on Friday.

The latest bid to find a long-term solution to the US debt crisis looked doomed to fail Sunday as lawmakers remained at odds over cutting social programmes and raising taxes on the rich.

Congressional stalemate over how to tackle America's $15 trillion budget deficit is adding to global economic concerns dominated by the financial woes that are threatening to unravel Europe's monetary union.

"There's a chance that people may move to sell dollars for yen to hedge risks that the US credit rating may be downgraded," a senior dealer at a European bank in Tokyo told Dow Jones Newswires.

"In this case, the (pair) may fall to the low 76s."

Intervention worries could quickly mount if ¥76.00 is breached, analysts said. Japan last intervened in the currency market in late October after the dollar hit a post-war low of ¥75.32.

The dollar was mixed against other major Asian currencies.

The greenback rose to 1 138.80 South Korean won from 1 137.70 on Friday, to Sg$1.2990 from Sg$1.2974 and to Tw$30.25 from Tw$30.23.

The unit held steady at 31.03 Thai baht while falling to 9 050.00 Indonesian rupiah from 9 065.00. It edged down to 43.33 Philippine pesos from 43.40.

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