* Euro flat vs dlr, yen; BOJ plan fails to stem risk aversion
* Euro zone PPI down 1.3 pct, German retail sales fall
* Aussie dlr higher after RBA slashes interest rates 100 bps
* Investors wary ahead of ECB rate decision Thursday
(Adds quotes, updates prices, changes byline)
By Jessica Mortimer
LONDON, Feb 3 (Reuters) - The euro was steady against the
the dollar and the yen on Tuesday as the boost to sentiment from
a Japanese stimulus plan and better-than-expected U.S. data
fizzled out, with investors remaining wary of taking on risk.
Falls in the euro were limited, however, as many in the
market stayed sidelined ahead of the European Central Bank's
rate decision on Thursday, where it is widely expected to leave
interest rates on hold at 2 percent.
A plan by the Bank of Japan to buy up to 1 trillion yen in
shares held by Japanese banks announced overnight had initially
stirred hopes for a recovery in shares and an easing in risk
aversion, but investors soon questioned its effectiveness.
Meanwhile, optimism over an improvement in the U.S. ISM
manufacturing index announced on Monday proved brief as
investors concluded that the still-weak reading suggests the
world's largest economy remains in deep trouble.
"The euro is seeing an unwinding of a slight bounce in risk
appetite as investors are selling into any rally in riskier
assets," UBS currency strategist Geoffrey Yu said.
Better ISM data, the BoJ stimulus plan and a deep interest
rate cut in Australia all briefly helped sentiment, but
investors remain worried about taking positions ahead of the ECB
rate decision and U.S. payrolls data on Friday, he said.
At 1209 GMT, the euro was steady against the dollar <EUR=>
at $1.2850, below an earlier high of $1.2913 hit during Asian
trade.
Against the yen, the euro was steady at 115.11 yen
<EURJPY=>, while the dollar was flat on the day at 89.50 yen
<JPY=>.
WEAK EUROPEAN DATA
Pressure will remain on the ECB to cut interest rates
further in the coming months as data again pointed to waning
inflationary pressures and a weakening economy.
Figures on Monday showed euro zone producer prices fell a
bigger-than-expected 1.3 percent, while German retail sales
unexpectedly fell for a third straight month in December.
The prospect of rates staying on hold, however, is helping
to limit the euro's downside, analysts said.
"Euro/dollar may breach below $1.28 but traders are unlikely
to drag the pair farther below the interim foundation of $1.2710
ahead of an ECB rate announcement that is widely unlikely to
produce an interest rate cut," Ashraf Laidi, chief markets
strategist at CMC Markets said in a note to clients.
Lingering concerns also remain about the fiscal health of
economies on the fringes of the euro zone.
Ireland announced that talks with trade unions collapsed on
proposed budget cuts that would be necessary to prevent a
downgrade to its sovereign ratings, though it still hopes to
press ahead with them [].
Meanwhile, the Australian dollar posted solid gains after
the Reserve Bank of Australia cut interest rates by 100 basis
points to a record low 3.25 percent [] and the
Australian government announced stimulus measures
[].
The Australian dollar rose by 1.2 percent against its U.S.
counterpart to $0.6391 <AUD=> and by the same amount against the
yen to 57.18 <AUDJPY=>.
(Reporting by Jessica Mortimer; Editing by Ron Askew)
