* German govt source says no detailed decisions at summit * Spanish 10-year yields top 7 percent, Italy bond sale due * Euro at 3-week low vs yen, dollar index at 3-week high LONDON, June 28 (Reuters) - The euro fell to a three-week low against the dollar on Thursday on expectations that a European Union summit starting later in the day will do little to address the region's debt crisis. Comments from a German government source that the two-day meeting will produce no detailed decisions dampened lingering hopes of progress. German Chancellor Angela Merkel has consistently opposed the idea of joint euro zone debt and on Wednesday rejected calls from Spain and Italy for action to curb their soaring borrowing costs. Spanish 10-year borrowing costs rose above 7 percent on Thursday, highlighting the market's concerns about the debt crisis in the region. Italy is likely to have to pay a high premium to attract buyers to a bond auction. The euro fell 0.3 percent against the dollar to $1.2408, its lowest since June 4. Analysts said expectations for the summit were so low that any positive headlines over the coming two days could lift the euro, although any such gains were likely to be limited and short-lived. "If we get nothing from the European summit then that is more or less what the market is expecting," said Carl Hammer, chief currency strategist at SEB. "If there are some headlines suggesting EU leaders are reaching agreement on curbing bank runs or using the ESM to buy peripheral bonds then that would boost the euro slightly." The common currency also hit a three-week low versus the yen of 98.615 yen on the EBS trading platform, while the safe-haven dollar rose to a three-week high against a basket of currencies and a three-week high versus the Swiss franc . "The summit will probably just show that the debt crisis needs a lot of time to be resolved. I don't think it's time to buy the euro," said Katsunori Kitakura, associate general manager of the market-making unit at Sumitomo Mitsui Trust Bank in Tokyo. ECB EYED While concrete steps towards further economic integration of the currency bloc seen unlikely at present, traders said the euro may be supported by expectations the ECB may cut rates or announce more long-term fund injections at its meeting next week. Bank Executive Board member Peter Praet said on Wednesday there was nothing to stop the bank cutting rates and 48 out of 71 economists polled by Reuters expected a cut. U.S. economic data offered rare positive surprises on Wednesday, with durable goods orders and pending home sales both beating market expectations, helping to boost risk sentiment in broad financial markets. That helped to lift the Australian dollar by around 0.3 percent to a one-week high of $1.0126 before dropping back to last trade down 0.1 percent at $1.0064. The U.S. dollar fell 0.4 percent against the yen to around 79.39 yen largely due to month-end selling by Japanese exporters, but it stayed within its trading range of the past few days. Traders also said trading was likely to be influenced by month-end and quarter-end flows in an otherwise thin market ahead of the EU summit.

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