Euro subdued in London

The euro steadied near a two-year trough against the dollar and hit a five-week low versus the yen on Tuesday after a meeting of finance ministers offered no positive surprises while a German court hearing kept the market nervous.
Eurozone ministers agreed to grant Spain an extra year, until 2014, to reach its deficit reduction targets in exchange for further budget savings and set the parameters of an aid package for the country's ailing banks.
Markets are hoping for a quick verdict but some analysts said a decision could potentially take a few weeks, keeping Europe on tenterhooks and possibly adding to bearish sentiment towards the euro. The court is not known to be pro-Europe and an adverse verdict could hurt integration plans.
"Very little is expected to come out of the various meetings or constitutional court. The euro is likely to stay under some pressure and any attempts to rebound will be viewed as selling opportunities," said Ian Stannard, head of European FX strategy at Morgan Stanley.
The euro was close to flat at $1.2319, edging back in the direction of a two-year low of $1.2225 hit the previous day on trading platform EBS. It also fell to a five-week low of 97.32 yen on EBS.
Reports that German Finance Minister Wolfgang Schaeuble said instruments to tackle the debt crisis could be used without prior announcement helped the euro rise to a session high of $1.2334 as peripheral bond yields fell, but gains were fleeting.
The euro has taken a hit after the European Central Bank cut interest rates last week, while a renewed rise in Spanish bond yields suggests there has been little let-up in investor concern over Spain's fiscal health or the wider euro zone debt crisis.
Spanish 10-year bond yields have risen back above the critical 7 percent level seen as unsustainable in the long-term.
With peripheral bond yields at elevated levels, the euro is expected to remain under pressure despite developments at the Ecofin meeting. Analysts said the political hurdles on how to use the euro zone's rescue fund and prevent further contagion remained very high.
"I think we have a long way to go before we reach the stage at which policymakers will be ready to act, particularly as it relates to potential bond purchases in the secondary market," said Todd Elmer, currency strategist for Citi in Singapore.
The euro's struggles supported the dollar index. The index, which measures the dollar's performance against major currencies was up 0.1 percent at 83.079. The dollar was flat against the Swiss franc at 0.9750 francs, not far from a 19-month high of 0.9825 francs.
The US currency fell against the yen, to 79.44, but held within a 79.08 yen to 80.10 yen range seen since late June. The Australian dollar recovered after Chinese trade data that disappointed some investors, and was last up 0.2 percent at US$1.0236.
Better-than-expected Swedish industrial production data pushed the euro to an 11-1/2 year low against the Swedish crown of 8.5836 crowns.