By Anirban Nag LONDON, Oct 21 (Reuters) - The euro slipped on Friday and was vulnerable on the downside as edgy investors sought to minimise exposure heading into the weekend on fading expectations that European leaders will be able to resolve the region's debt crisis on Sunday. The common currency was lower against the safe-haven Japanese yen and Swiss franc as deep divisions between France and Germany over the best way to bolster the regional bailout fund's firepower weighed on sentiment. Failure to agree on leveraging the EFSF will hurt confidence in the euro zone's ability to tackle its debt crisis after nearly two years of trying to get on top of a problem that started in Greece and now threatens to engulf Italy, Spain and even France. Some investors are expecting European leaders will make progress at Sunday's summit, but France and Germany said no decision will be made until a second meeting on Wednesday. The euro was down 0.2 percent against the dollar at $1.3742 , on track for its first weekly loss in three. Still, it has held above its nine-month low hit in early October, despite a widening in spreads on yields between safe-haven German Bunds and other European countries. "The euro is being driven by short-term players with longer-term investors like asset managers all holding short positions and on the sidelines," said Manuel Oliveri, currency strategist at UBS, Zurich. "There is a lot of international pressure on the euro zone leaders to come up with a solution. So if there is one, we could see the euro bounce." Traders said there were decent offers to sell the euro around $1.3785-95 with sizeable sell orders from Asian investors above $1.3820. On the downside, the euro may find support at $1.3700, with plenty of euro bids said to be lurking at levels between $1.3700 and $1.3650. Below those levels, further support looms at the 100-week moving average at $1.3669 briefly breached on Thursday, $1.3650 at two daily lows hit earlier this week with Asian sovereign bids around the level. POSITIONS SQUARE A trader at a Japanese bank said given the euro's extreme sensitivity to headlines, orders from clients were being executed very quickly. The trader added that no one wanted to get caught with a large position and investors were preferring to go neutral into the weekend. Reflecting the short-term volatility in the common currency, euro/dollar implied vols were trading around two-week highs. One-month implied vols was trading around 15.95 percent, up from 15.50 percent on Thursday with risk-reversals still showing downside risks for the euro. Markets are also bracing for fresh data from Germany, which could fuel recession concerns for Europe's biggest economy. Due at 0800 GMT, the influential Ifo business climate is expected to fall in October for the fourth month in a row. A positive surprise could give a slight boost to the euro. "IFO has been the best of the sentiment indicators and we would not be surprised to see it hold up better than many expect," said Kit Juckes, currency strategist at Societe Generale. Against the yen, the common currency fell 0.2 percent to 105.41 yen , while against the Swiss currency the euro was down 0.7 percent at 1.2235 francs. The greenback was down 0.2 percent on the yen, last changing hands at 76.69 .

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