-- Euro recovers after hitting eight-month low against dollar -- German, U.K. and French PMI data better than expected -- Money placed with the ECB by banks rose to its highest level By Alexandra Fletcher Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The euro steadied in European trading Monday after falling to an eight-month low against the dollar during Asian hours, helped by encouraging business sentiment data. But weak European stock markets and a rise to a record high in the cost of insuring German government debt against default were testimony to the underlying euro-zone worries still underpinning demand for the greenback and dampening investor appetite for riskier currencies. Sterling had a lively session. It saw a one cent dive against the dollar after data showed a surprise recovery in manufacturing growth in September but quickly recovered, with London traders citing an accidental trade. The pound came close to $1.56 then plunged to $1.5480, only to recover straight away to $1.5530. In contrast, the Swiss purchasing managers' index came in lower than expected at 48.2, potentially increasing the pressure on the Swiss National Bank to raise the euro's floor against the Swiss franc to help Swiss exporters. The Swiss franc was largely unmoved, though. The euro zone's PMI was also weak, hitting a 25-month low of 48.5, but like in the U.K. this was better than economists had forecast, providing a mild shot in the arm to the flagging single currency. Analysts said the effects were likely to wear off with key jobs and manufacturing data still to come this week as well as policy statements from the Bank of England, European Central Bank and Reserve Bank of Australia. "Better-than-expected PMI data provided some short-term relief to the market," said Ian Stannard, a senior currency strategist at Morgan Stanley. "However, this relief sentiment will fade pretty quickly as we see a much riskier week ahead," he said, anticipating a dovish tone from central banks, even if no interest rate cuts or quantitative easing are forthcoming. Greece continued to cast a pall over the market with the government set to slash thousands of public-sector jobs to meet the demands of international creditors, with a crucial bailout payment pending. Against that backdrop, funding tensions still stalk the interbank market, with the amount of money placed by banks with the European Central Bank rising to its highest level in more than a year on Friday, as banks pulled back their business with other banks. With European bank stocks tumbling and Dexia succumbing to talk of liquidity problems after Moody's Investors Service warned that it might downgrade the Franco-Belgian bank, counterparty risk is a growing concern as the euro-zone debt crisis gathers pace. Still to come at 1400 GMT is the U.S. Institute for Supply Management's factory index for September, which is seen dipping to 50.4 from 50.6. At 1103 GMT, the euro was trading at $1.3359 against the dollar, compared with $1.3390 late Friday in New York, according to trading system EBS. The dollar was at Y77.03 against the yen, compared with Y77.09, while the euro was at Y102.75, compared with Y103.12. Meanwhile, the pound was trading at $1.5532 against the dollar, compared with $1.5587 late Monday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 78.862 compared with 78.793 late Friday in New York. A summary of key levels for chart-watching technical strategists is below: Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF Spot 1036 GMT 1.3376 76.94 1.5543 0.9078 3 Day Trend Bearish Bullish Bearish Bullish Weekly Trend Bearish Range Bearish Bullish 200 day ma 1.4015 80.20 1.6060 0.8782 3rd Resistance 1.3463 77.27 1.5715 0.9301 2nd Resistance 1.3414 77.10 1.5665 0.9183 1st Resistance 1.3384 76.98 1.5599 0.9129 Pivot* 1.3458 76.91 1.5596 0.9044 1st Support 1.3313 76.76 1.5479 0.9032 2nd Support 1.3250 76.65 1.5375 0.8991 3rd Support 1.3115 76.50 1.5329 0.8918 Forex spot: USD Index Spot 1036 GMT 78.795 3 Day Trend Bullish Weekly Trend Bullish 200 day ma 76.239 3rd Resistance 80.030 2nd Resistance 79.930 1st Resistance 79.154 Pivot* 78.479 1st Support 78.807 2nd Support 78.644 3rd Support 78.384 -By Alexandra Fletcher, Dow Jones Newswires; +44 (0) 20 7842 9462, alexandra.fletcher@dowjones.com (Dow Jones Technical Strategist Francis Bray contributed to this story.)

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