By Alexandra Fletcher The euro steadied against the dollar during European trading Tuesday after weakening slightly on a poor run of manufacturing data that showed the real economy in the euro area remains in poor shape. The single currency recouped some early losses to trade at around $1.2850 against the dollar after weakening to $1.2825 following the release of data from Markit that showed the euro-zone purchasing managers' index fell to 46.8 in March from 47.9 in February--its lowest level since December. Spanish manufacturing was also particularly weak, as factory activity shrank at the steepest rate in five months in March to 44.2 from 46.8 a month earlier. Ireland, seen widely as a success story after its bailout in 2010, posted its first sharp contraction in manufacturing activity for 13 months to 48.6 from 51.5. Activity in eastern Europe also declined as conditions worsened in the key export market of Germany. Euro-zone unemployment data added to the gloom. The region's jobless total in February was 19 million, or 12%, the highest since records began in 1995. The jobless rate stayed at 12%. For now, traders appear unwilling to place large bets on the euro in either direction until the European Central Bank meeting Thursday. President Mario Draghi will be likely pressed on the Cyprus bailout that was finalized last week, which rattled investor confidence in the euro zone and highlighted the region's struggle to pull weaker economies out of recession. Some market participants are also mulling whether the ECB might cut the main refinancing rate given the latest deterioration of economic data. "Quite rightly, Draghi will also be pressed on the Cyprus bailin and whether that will be a template for other troubled nations going forward," said Jane Foley, senior currency strategist at Rabobank in London. "There is certainly a chance that the ECB could cut the refi rate but it's more likely that Draghi will like to keep his powder dry for now," she added. The yen bobbed higher and lower in nervy trade ahead of the Bank of Japan's first rate decision under its new leadership Thursday. Since late last year, traders and investors have amassed large bets that the yen will fall as the central bank adopts more stimulative policy, and according to a survey of economists conducted by Dow Jones Newswires, all expect the BOJ to take some kind of easing measures under Haruhiko Kuroda's leadership. The dollar hit a high of ¥96.71 on Mar. 12 reflecting that view. More recently, though, those bets against the yen have eased up, with the dollar falling back down to ¥92.57 in Asian trade. Weak U.S. manufacturing data Monday and comments from Prime Minister Shinzo Abe which suggested the Bank of Japan may not hit its 2% inflation target, added to the dollar's slide, and the yen's ascent. However, the yen fell back again somewhat as European trading progressed. The Australian dollar was steady against the dollar after the Reserve Bank of Australia kept the benchmark interest rate unchanged at 3.0% for the third straight month overnight, signaling confidence that the country's resource-rich economy could avoid a hard landing as the mining boom fades. Elsewhere, the Chinese yuan rose to a record high against the U.S. dollar after the People's Bank of China surprisingly guided the yuan fixing to a much stronger level. In the over-the-counter market, the dollar was at 6.1986 yuan at around 0830 GMT, the lowest level since the launch of the modern Chinese currency trading system in 1994. The dollar was closed at 6.2080 yuan Monday. "The strength in the yuan is about flows--trade flows and capital flows. Also, with the yen rallying recently, that has given China the opportunity to go for stronger fixings," said Daragh Maher, senior currency strategist at HSBC HSBA.LN +0.84% in London. Looking ahead, U.S. industrial orders are due. Around midday in Europe, the euro was trading at $1.2835 against the dollar, compared with $1.2850 late Monday in New York, according to trading system EBS. The dollar was at ¥93.32 against the yen, compared with ¥93.21, while the euro was at ¥119.75, compared with ¥119.86. Meanwhile, the pound was trading at $1.5191 against the dollar, compared with $1.5229 late Monday in New York. The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 73.280 from about 73.277.

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