LONDON (Reuters) - The euro held steady on Monday, helped by the prospect of European Central Bank action to tackle the debt crisis, though it was seen vulnerable to selling on rallies and signs of disagreement among euro zone politicians. Expectations the ECB will step in and help lower sky-high Spanish and Italian borrowing costs in the coming weeks have lifted the euro in recent days, though traders were mindful of opposition from richer northern European countries. Belgian central bank governor Luc Coene said in a newspaper interview that the ECB should ensure any help it gives to indebted countries comes with strict conditions. And German magazine Der Spiegel on Sunday quoted Finnish Prime Minister Jyrki Katainen as saying Finland remained opposed to ECB bond-buying. "There is no coherent message between politicians and policymakers," said Jeremy Stretch, head of currency strategy at CIBC, adding that the euro's failure to break above $1.2450 would leave traders inclined to sell it on rallies. The risk of politicians disagreeing on ECB action would make traders a little less wary of selling the euro, he said. The euro was flat on the day at $1.2288, though it was expected to maintain its gradual path lower after hitting a one-month high of $1.2444 last Monday on trading platform EBS. ECB President Mario Draghi said earlier this month that the bank may buy more government bonds after pledging to do everything necessary to preserve the euro. This boosted the euro as traders cut back on bets on the currency falling. On Friday, the euro fell to $1.2241 and a break below this level could see it target the early August low of $1.21335. The safe-haven Japanese yen showed little reaction to weaker-than-expected economic growth data in Japan in the three months to June. However, this added to signs the global economy is suffering as a result of the euro zone debt crisis and weighed on riskier assets, including the higher-yielding Australian and New Zealand dollars. A trader for a Japanese brokerage house in Tokyo said market participants were still looking for opportunities to sell the euro when it rallies. However, they were cautious. "Speculation that the ECB might take some concrete measures is making it a little hard for the market to sell (the euro) too aggressively," the trader said. Andrew Robinson, FX analyst for Saxo Capital Markets in Singapore said as long as technical support at its early August low near $1.2135 holds, the euro may re-test its recent one-month high and possibly rise above $1.2600 over the next two to three weeks. The Australian dollar eased 0.4 percent to $1.0537, held back by investor concerns about a slowdown in global growth. It hit a 4-1/2 month high of $1.0615 last week. In addition to the weak data from Japan, China -- a vital trading partner for Australia -- reported weak trade and bank lending data on Friday. The U.S. dollar was steady at 78.21 yen, holding above a two-month low of 77.90 yen hit in early August, while the euro lost 0.2 percent to 96.02 yen. Traders cited talk of dollar offers from Japanese exporters at levels above 78.80 yen, while offers were said to be lurking below 77.50 yen.

Source