(Reuters) - The euro dipped on Tuesday, stuck near the bottom of its recent trading range after a rise in Italian and Spanish bond yields underscored the challenges facing European leaders as they struggle to contain the region's debt crisis. The dollar briefly spiked higher against the yen but later gave back most of its gains. Traders said the move was likely caused by a large-lot flow and stop-loss buying, and was probably not intervention. The euro had gained some reprieve in recent sessions as a change in leadership in Italy and Greece stirred hopes for progress in tackling Europe's debt problems. But such optimism was tempered when Italian and Spanish government bonds came under renewed selling pressure on Monday. A drop in European equities, including banking shares, also did the euro no favors. While day-to-day fluctuations in the euro and investor risk appetite are hard to predict, the single currency is likely to remain under pressure versus the dollar and the yen in coming weeks, said Junya Tanase, chief FX strategist for J.P. Morgan in Tokyo. "There is no doubt that Europe is nowhere near a situation that can be viewed with optimism," Tanase said. "The bias is toward risk-off with both the dollar and the yen rising, while cross/yen pairs including euro/yen are likely to come under downward pressure," he added. The euro fell 0.2 percent to $1.3612. The single currency is now near the lower end of its trading band since late October of $1.3484 to $1.4248. One trader said the euro may find some support below $1.36 due to bids from Middle Eastern sovereign players and repatriation of funds by European players ahead of their year-end book closings. Possible support for the euro lies near $1.3569, the bottom of the cloud on the daily Ichimoku chart, a popular form of technical analysis. The euro fell 0.1 percent versus the yen to 104.96 yen, stuck near a one-month low around 104.74 yen hit last week. Euro/yen is hovering near a critical support area of 104.70 yen to 104.90 yen, where a number of support levels are clustered. A 61.8 percent retracement of the euro's rally versus the yen in October stands near 104.90 yen, while its lows in the past few weeks converge around 104.70 to 104.80 yen. A break below that support area could open way for a test of Ichimoku cloud bottom, which now comes in near 104.12 yen, said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo. The dollar held steady against the yen at 77.11 yen. Earlier, the dollar jumped around 40 pips to an intraday high of 77.51 yen, but then gave back its gains. Market players remain wary of the possibility of Japanese action ever since Japan sold an estimated 7.7 trillion yen ($98.5 billion) on October 31, a daily record for intervention, to curb the yen's strength. EUROPEAN BOND YIELDS Yields at a 3 billion euro five-year Italian bond sale on Monday hit euro-era highs of 6.29 percent, just a day after former European Commissioner Mario Monti was named to lead the country -- a move that had been hoped would help restore investor confidence. Although market players said the debt sale itself went reasonably well, Italian bond yields rose in the secondary market on Monday after the auction, while the 10-year Spanish government bond yield climbed above 6 percent for the first time since August. Position unwinding by various financial institutions ahead of quarter-end and year-end book closings at the end of December is likely to add to selling pressure against euro zone debt, said Makoto Noji, senior bond and currency strategist for SMBC Nikko Securities in Tokyo. "Position unwinding may continue ahead of book closings and such moves may end up becoming factors that led to euro weakness," Noji said. More euro zone debt auctions are coming this week, with Spain aiming to sell between 3 billion euros ($4.1 billion) and 4 billion euros of 10-year bonds on Thursday.

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