By Rika Otsuka
TOKYO, Sept 7 (Reuters) - The euro slid on Tuesday from athree-week peak against the dollar hit the previous day, asrekindled worries about the European banking sector promptedinvestors to cut risks.
The euro fell 0.5 percent on the day to $1.2810 aftertriggering stop-loss orders in the $1.2850-60 area, as a WallStreet Journal report stoked fears about the viability ofEuropean banks by highlighting the weakness of euro zone stresstests earlier in the year.
On Monday, the single European currency rose as high as$1.2920, its highest in almost three weeks.
The euro is now testing support at $1.2795-80, with the21-day moving average at $1.2795 on Tuesday and the 55-day movingaverage at $1.2788.
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"Concerns about euro zone banks have been growing again,hitting investor sentiment that had improved a little afterbetter-than-expected U.S. jobs data last week," said TsutomuSoma, senior manager of the foreign securities department atOkasan Securities.
"The trend in the euro might have changed as the market'smood as shifting back toward risk reduction."
The dollar index, a gauge of the U.S. currency's performanceagainst a basket of six major currencies, rose 0.4 percent to82.355, rebounding from a four-week trough of 81.876 on Monday.
The dollar was steady against the yen at 84.20 yen, remainingwithin sight of a 15-year low of 83.58 yen hit last month, asinvestors are keen to buy safe-haven currencies, such as theJapanese currency and the Swiss franc.
U.S. financial markets were closed on Monday for the LaborDay holiday and will resume trading later in the day.
The Bank of Japan concludes its two-day policy meeting laterin the day and is expected to hold off on easing monetary policythis time.
The BOJ boosted its cheap loan scheme at an emergency meetinglast week, bowing to government pressure for steps to protect afragile recovery after the yen surged to a 15-year high againstthe dollar.
The dollar could slip further, given expectations that thecentral bank will take no additional easing steps in the nearterm, while wariness over possible market intervention byJapanese authorities to rein in the yen's gains is keepingspeculators cautious about aggressively taking long yenpositions, traders said.
The Australian dollar dipped 0.2 percent on the day to$0.9150, having slipped from a four-week high of $0.9181 hit onMonday.
The Reserve Bank of Australia is widely expected to keeprates at 4.5 percent at its board meeting on Tuesday. Investorswill be looking for the central bank's view on the economy afterrecent strong domestic data. A policy decision is expected at0430 GMT. (Editing by Edmund Klamann)
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