SINGAPORE, July 15 (MNI) - The U.S. dollar ended Asian trading Friday with a mixed bias, off the initial lows seen after the latest ratings warning on U.S. sovereign debt, as risk aversion sapped gains in the euro and Australian dollar even as the yen held steady. Early in the Asian morning Standard & Poor's placed the United States on negative credit watch, saying there is a "one-in-two" chance it will cut the AAA/A-1+ sovereign rating within 90 days. The move is even more forceful than that by Moody's on Wednesday, in that it is not dependent on passage of a debt limit extension, which it expects, but rather on whether it sees a credible long-term deficit reduction plan emerge from the current political stalemate in Washington. On Wednesday, Moody's placed its U.S. Aaa government bond rating and related ratings, like those of Fannie Mae and Freddie Mac, on review for possible downgrade if the debt limit is not extended. The U.S. dollar weakened immediately after the announcement, boosting euro-dollar up to $1.4200, while dollar-yen fell to a Y78.89 low. But the dollar's losses have since been tempered by traders cutting back on risk positions ahead of European banks' stress test results, to be released later today, and after the Australian dollar was hit by Westpac Bank's announcement that it is now expecting the Reserve Bank of Australia's next rate move to be a cut. "The uncertainty emanating from the U.S. government debt ceiling issue is increasing," said United Overseas Bank analysts. "The latest Moody's and S&P's action of putting U.S. debt on negative watch for possible downgrade adds to the urgency for U.S. to resolve its debt ceiling stalemate." "We still believe that the U.S. debt ceiling limit will be raised and a default will be avoided but the longer this U.S. political drama drags on, the more likely that the U.S. Treasury yields will be pushed higher especially as we approach the 2 August deadline." Euro-dollar was trading at $1.4141 in late Asian trade, still slightly above $1.4130 traded near the U.S. close overnight, but well below its New York close and also down from its midday level of around $1.4172. "Another extremely volatile week for global markets went by," commented Barclay's Capital in a research note. "The European debt crisis has not vanished and contagion spreading to Italy has made the market even more sensitive." Dealers said jitters persisted over the outcome of the banks' stress tests, and many players were offloading positions in anticipation of a disappointing outcome. The Financial Times reported Friday that 10 of 19 banks being tested would fail the test. "The market seems to have settled on the notion that a Greek restructuring is now a matter of when and how, and no longer if, and the question is, therefore, whether instruments are available to contain the contagion. The announcement of the bank stress tests on Friday may be an important first step," Barclay's said. Dollar-yen, meanwhile, managed to also rebound back up toward where it had started the day, as the dollar recovered on safe-haven trades but failed to make further headway through the afternoon. Dollar-yen was at Y79.17 in late Asian trade, just about where it was after midday here, in the middle of a Y78.89 to Y79.24 range, and almost flat from Y79.15 near the U.S. close. Dealers noted, the pair was lifted off the early low on rumored demand for the Japanese Gotobi Day fixing, and was also aided by intervention concerns. This morning, Japanese Finance Minister Yoshihiko Noda said the government will watch foreign exchange rates closely but declined comment on whether Tokyo will take action in the forex market in order to stem the yen's rapid rise. He also told a regular news conference that investor confidence in the U.S. dollar remains intact despite the recent warnings from credit ratings agencies about a possible default on U.S. government debt obligations. In other currencies, the Australian dollar was also hit by some late selling after Westpac became the first major Australian bank to predict a series of rate cuts, citing the impact of the European sovereign debt situation on the global economy as the catalyst for a first cut in December. Westpac is now expecting 100 basis points of rate cuts through 2012, with the first cut of 25 basis points likely in December. "The catalyst for the first move is likely to be further adverse developments in Europe and their knock on effects on global financial markets," chief economist Bill Evans wrote in a report. "Among the many other side-effects will be an ongoing negative impact on business and consumer confidence in Australia that is likely to become more pervasive as conditions deteriorate." The Australian dollar slipped below $1.0700 on the news, and was trading at $1.0675 in late Asian trade, well below the initial range of between $1.0717 and $1.0747

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