(Reuters) - The euro fell for a third successive day on Friday, retreating further from recent peaks as some investors concerned about whether the European Central Bank will be able to stem the debt crisis sold the currency.
Growth-linked currencies such as the Australian dollar also fell as weaker-than-expected Chinese trade data raised worries over a slowdown. However, expectations recent data may lead to further monetary stimulus in the world's second largest economy limited losses.
The euro slipped 0.3 percent to $1.2270, having come off a one-month high of $1.2444 struck on Monday, and on track for its first weekly loss in three weeks. Traders cited bids at $1.2250/60 with offers above $1.2300.
Expectations the ECB will step in to ease borrowing costs for Spain and Italy helped the common currency to a one-month high against the dollar and rally against the yen earlier this week. But some of that optimism is fading, driving some investors to book profits.
Weak euro zone economic data has also weighed on the euro in recent days. The German economy ministry said on Friday Europe's largest economy was expected to face "significant risk" linked to the euro zone crisis.
"We are seeing some of the reserve managers selling the euro, pulling funds out of the region. The critical areas of support are $1.2250 and $1.2200 and a break below that will take it lower," said Peter Allwright, head FX trader at RWC Capital, a fund manager.
Next week, euro zone second-quarter gross domestic product data will be released and expectations are that the regional economy contracted. This is likely to put pressure on the ECB to cut interest rates, a factor that will weigh on the euro.
"The euro is working its way through another small corrective phase within a massive, long-term downshift," said Richard Hastings, macro strategist at Global Hunter Securities.
CHINESE NUMBERS
Earlier, below-forecast Chinese data hurt appetite for riskier assets and currencies. Exports grew just 1.0 percent in July from a year earlier, below market expectations of an 8.6 percent rise, while imports grew 4.7 percent, compared to forecasts of a 7.2 percent rise.
The Australian dollar was down 0.7 percent at $1.0503, a day after touching $1.0615, its highest since March 20.
Before the Chinese data, the Aussie dropped after the Reserve Bank of Australia released its quarterly statement on monetary policy, in which it upgraded its 2012 outlook for economic growth but warned a strong currency could constrain expansion more than in the past.
With demand for risky assets ebbing, investors chose the safety of the dollar and the yen. The yen outperformed.
The dollar bought 78.54 yen, down 0.15 percent on the day but still in the narrow 77.90-78.80 yen range that has held since late July. It hit a three-week peak of 78.79 yen on Thursday.
Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo said the dollar could gain against the yen due to rising U.S. Treasury yields. They have inched up on solid U.S. data, which may see expectations of another round of bond buying by the Federal Reserve scaled back.
The dollar index was up 0.16 percent at 82.77, well above a one-month low of 82.041 touched on Tuesday.
