FOREX-Euro, Aussie fall but Aussie trims losses after RBA

                                
 * Euro under pressure on banking sector worries
                                
 * RBA keeps rates steady, gives no clues for future
                                
 * China May PMI slips from April, near forecast
                                
 By Rika Otsuka
                                
 TOKYO, June 1 (Reuters) - The euro and the Australian dollar
fell on Tuesday as investors remained keen to cut risk, but the
Aussie trimmed losses after comments from the Australian central
bank were neutral on monetary policy rather than dovish as some
had expected.
                                
 The euro fell back towards a four-year trough against the
dollar marked last month, under pressure as worries mount that
the region's sovereign debt problems may spread to the banking
system.
                                
 The European Central Bank on Monday warned that euro zone
banks faced up to 195 billion euros in a "second wave" of
potential loan losses over the next 18 months due to the
financial crisis, and said it had increased purchases of
euro-zone government bonds. See [ID:nLDE64U0OS].
                                
 The Australian dollar was knocked lower after approvals for
building new Australian homes dived in April, backing bets the
Reserve Bank of Australia (RBA) would not raise interest rates
anytime soon. [ID:nSYU010019] [AU/INT].
                                
 The RBA kept rates on hold at 4.5 percent as expected but
traders who were watching for hints that it might hold rates
steady for the coming months, only got a central bank statement
saying that its policy was appropriate for the near term. [nRBA]
[ID:nSGE65006Q]
                                
 That helped the Aussie pare losses. The Australian dollar was
0.7 percent lower at $0.8398 <AUD=D4> after falling as far as
$0.8354. Against the yen, it dropped 1 percent to 76.47 yen
<AUDJPY=R> after sliding at one point to 76.05 yen.
                                
 "Economic fundamentals in Australia are not so negative but
the impact from Europe, worries that the pace of China's economic
growth may slow, and weakness in stocks are all weighing on the
Aussie," said Tomohiro Nishida, treasury department manager at
Chuo Mitsui Trust and Banking.
                                
 The euro <EUR=> fell 0.3 percent to $1.2273, hovering above a
four-year low of $1.2143 struck on May 19. Near-term support is
seen around $1.2140, the 50 percent Fibonacci retracement of the
currency's 2000-08 advance.
                                
 "Over the next 18 months calm water could turn turbulent in
the blink of an eye," RBC Capital senior currency analyst David
Watt wrote in a note.
                                
 "Accordingly, euro rallies seem likely to remain rather
shallow and in that regard it is struggling to maintain the $1.23
handle."
                                
 Traders said investors were looking at every bounce in the
single currency to sell. Against the yen, the euro slipped 0.1
percent to 111.93 yen <EURJPY=R>.
                                
 Speculators and funds have gone short on the euro in droves
in recent months with the latest data from the Commodity Futures
Trading Commission suggesting they were still wary of cutting
those positions.
                                
 Eyes are on the G20 meeting of finance officials and central
bankers in South Korea later this week, with investors keen for
reassurance that the euro zone debt problems are being dealt
with. [ID:nN31218653]
                                
 The dollar inched down 0.1 percent against the yen <JPY=> to
91.16 yen.
                                
 But the dollar index <.DXY> edged up 0.1 percent to 86.67,
supported by safe-haven inflows amid growing worries about the
sustainability of a global recovery.
                                
 Underlining those economic risks, China warned on Monday that
global growth remained vulnerable to sovereign debt risks and the
possibility of a second downturn. [ID:nTOE64U03S]
                                
 Data showed on Tuesday China's official purchasing managers'
index (PMI) fell to 53.9 in May from 55.7 in April. The reading
was in line with the median forecast and marked the 15th straight
month that the PMI has stood above the threshold of 50 that
demarcates expansion from contraction. [ID:nTOE65001Z]
                                
 In Japan, Tokyo market players were split on how much impact
political woes for Prime Minister Yukio Hatoyama would have on
the yen and other assets.
                                
 Hatoyama said on Tuesday that he would stay on in his post,
media reported, despite pressure from within his own party to
resign as his approval ratings slide ahead of an upper house
election. [ID:nTOE650029]
                                
 "A change in leadership won't end Japan's political
confusion. The yen is likely to weaken just as political
confusion in Britain has recently hit sterling," said Koji
Fukaya, senior FX strategist at Deutsche Securities.
                                
 Cross/yen was also hurt after news that Argentina extended
the deadline for its debt swap by two weeks on Monday.
[ID:nN31256828]
 (Additional reporting by Anirban Nag in Sydney and Kaori Kaneko
in Tokyo; Editing by Edwina Gibbs)