* Euro relinquishes early gains, tracks losses in equities
* Euro hits lifetime low vs Swiss franc
* Investors still jittery over euro zone debt problems
(Adds quote, updates prices)
By Naomi Tajitsu
LONDON, June 8 (Reuters) - The euro slipped on Tuesday,
reversing early gains as European shares fell, with concerns
that euro zone debt problems would stifle the region's economic
growth causing investors to steer clear of risky assets.
The single European currency hovered near the four-year low
it hit against the dollar on Monday. It skidded to a lifetime
low versus the Swiss franc as traders tested the resolve of the
Swiss central bank to rein in strength in the domestic currency.
European shares <> reversed modest gains made early in
the session to trade nearly 1 percent lower, with investors risk
averse and the euro seen vulnerable to more losses.
"There's been a big drop in equity markets and something of
a rise in general volatility," said Peter Frank, currency
strategist at Societe Generale, adding worries over debt
problems in some euro zone countries were driving short-term
movements.
Analysts said the euro gained support earlier in the day
after euro zone ministers made final arrangements on Monday to
set up funds for countries facing debt servicing problems.
Some said final details of a vehicle to raise up to 440
billion euros in loans had limited impact on the euro as it was
widely expected, and that the turnaround in stock prices had
prompted the euro's retreat.
A widening in peripheral euro zone bond yield spreads over
their safe-haven German counterparts also weighed on the euro,
analysts said.
By 1130 GMT, the euro <EUR=> was close to flat on the day at
$1.1930, pulling back from a session high of $1.1982 in earlier
trade to hit the day's low of $1.1900. Against the yen
<EURJPY=R> the euro slipped from an early high of 110.05 to
stand at 109.15.
Some market participants said euro/dollar may be hemmed in
by options expiring at 1400 GMT.
"There are a big euro expiries at 1.1900, 1.1950 and 1.2000
which could keep it in a range today," said a London based
sales-trader.
On Monday, the single currency fell as low as $1.1876 on
electronic trading platform EBS, its weakest since March 2006,
while plumbing 108.06 yen, its lowest in more than eight years.
The euro has stayed on the back foot since its dramatic fall
late last week, when weaker-than-expected U.S. jobs data and a
warning by Hungary that it may face Greek-style debt problems
led investors to shed risky assets.
MORE EURO LOSSES?
The euro <EURCHF=> fell to 1.3785 Swiss francs on EBS, as
traders took a stab at the 1.3800 francs level to see if the SNB
would defend the euro at that rate.
Data on Tuesday showed Switzerland's currency reserves
soared in May, reflecting massive intervention by the central
bank last month even as the franc continued to climb against a
broadly weak euro.
Analysts said the rapid rate at which the SNB has been
selling the franc was unsustainable, and that this view had
helped to push the euro lower against the Swiss currency.
Germany's government agreed to an austerity package while
Hungary promised cuts to meet budget targets, indicating more
European countries were taking steps to decrease their deficits.
Still, markets fretted over the region's banking system and
the impact austerity will have on growth, and many expect the
euro to suffer more losses in the medium to longer term.
"The macro picture remains indicative for the euro to remain
in a downtrend, especially versus the dollar," UBS analysts said
in a note.
(Editing by John Stonestreet)
