By Rika Otsuka
TOKYO, Sept 7 (Reuters) - The euro slid on Tuesday from athree-week peak against the dollar hit the previous day, asrekindled worries about the European banking sector promptedinvestors to cut risks.
The euro fell 0.6 percent on the day to $1.2797 aftertriggering stop-loss orders in the $1.2850-60 area, as a WallStreet Journal report stoked fears about the viability ofEuropean banks by highlighting the weakness of euro zone stresstests earlier in the year.
The single currency was further pressured as Germany'sbanking association said on Monday the country's 10 biggest banksmay need 105 billion euros of additional capital under a revampof banking rules designed to prevent future financial crises.
The euro on Monday rose as high as $1.2920, its highest inalmost three weeks.
The euro on Monday rose as high as $1.2920, its highest inalmost three weeks.
"Concerns about euro zone banks have been growing again,hitting investor sentiment that had improved a little afterbetter-than-expected U.S. jobs data last week," said TsutomuSoma, senior manager of the foreign securities department atOkasan Securities.
"The trend in the euro might have changed as the market'smood is shifting back toward risk reduction."
The dollar index, a gauge of the U.S. currency's performanceagainst a basket of six major currencies, rose 0.4 percent to82.403, rebounding from a four-week trough of 81.876 marked onMonday.
U.S. financial markets were closed on Monday for the LaborDay holiday and will resume trading later in the day.
The dollar was steady against the yen at 84.23 yen, remainingwithin sight of a 15-year low of 83.58 yen hit last month, asinvestors are keen to buy safe-haven currencies, such as theJapanese currency and the Swiss franc.
Against the yen, the euro slid 0.6 percent to 107.76,although it was still well above a nine-year low of 105.44 yenreached in late August.
The euro was down 0.7 percent versus the Swiss franc at1.2945 francs, crawling towards an all-time low of 1.2850 francsstruck on Aug. 31.
The Bank of Japan concludes its two-day policy meeting laterin the day and is expected to hold off on easing monetary policythis time.
The BOJ boosted its cheap loan scheme at an emergency meetinglast week, bowing to government pressure for steps to protect afragile recovery after the yen surged to a 15-year high againstthe dollar.
The greenback could slip further, given expectations that thecentral bank will take no additional easing steps in the nearterm, while wariness over possible market intervention byJapanese authorities to rein in the yen's gains is keepingspeculators cautious about aggressively taking long yenpositions, traders said.
The Australian dollar dipped 0.2 percent on the day to$0.9151, having slipped from a four-week high of $0.9181 hit onMonday.
The Reserve Bank of Australia is widely expected to keeprates at 4.5 percent at its board meeting on Tuesday. Investorswill be looking for the central bank's view on the economy afterrecent strong domestic data. A policy decision is expected at0430 GMT.
"The Australian dollar is likely to extend its recent gainsif the RBA's statement suggests it could further boost interestrates," said Hideki Hayashi, global economist at MizuhoSecurities. (Additional reporting by Charlotte Cooper; Editing by JosephRadford)
