FOREX-Euro near 3-1/2-month low vs dlr as Greece churns

* Euro down 2.3 pct after falling in 8 of last 10 sessions

* News of JPMorgan trading loss hurts risky assets

* Greece political uncertainty weighs

* Options show bias for euro puts increasing

(Updates prices, adds quotes)

By Julie Haviv

NEW YORK, May 11 (Reuters) - The euro was little changed
against the dollar and hovered near a 3-1/2-month low in choppy
trade on Friday as political uncertainty in Greece and hefty
losses disclosed by U.S. bank JPMorgan Chase left investors on
edge about taking on risk.

The euro has dropped against the dollar in eight of the past
10 sessions for a 2.3 percent decline in value as investors have
focused on Greece, where inconclusive election results last
Sunday threw the country into political disarray and raised the
risk of it exiting the euro zone.

"The recent decline in the euro/dollar is clearly a direct
response to the decline in global equity markets," said Gareth
Sylvester, senior currency strategist at Klarity FX in San
Francisco.

"These declines have been driven by the shifting political
landscape in Europe, most notably in Greece and France, as well
as the elevated Spanish banking concerns."

The euro last traded up 0.1 percent at $1.2942 after
earlier hitting a trough of $1.2905, its lowest level since Jan.
23.

"We would suggest that the January lows at $1.2600 will
provide achievable price targets," Sylvester said.

Traders said a reported euro option barrier at $1.2900 was
the near-term focus on the downside, while offers at $1.2980
were likely to check near-term gains.

The euro had earlier climbed after Greek conservative leader
Antonis Samaras said there were still hopes a government could
be formed. But it later moved lower when the leader of the
moderate Democratic Left said Greece was heading for a repeat
poll.

The euro and growth-linked currencies were hit earlier in
the session as investors shunned risky assets after JPMorgan
Chase & Co said it suffered a trading loss of at least
$2 billion from a failed hedging strategy.

Analysts said many market players were resigned to further
political uncertainty in Greece, meaning the euro would probably
grind lower against the dollar rather than drop suddenly.

Options market participants are betting on more euro
weakness, with three-month risk reversals showing
a firm bias for puts, trading -2.7 vols, flat from Thursday, but
up from -2.325 vols a week earlier and -2.150 vols at the start
of the month.

"The market does not feel there's any sense of urgency;
investors have come round to the idea of the probability of
another election," said Derek Halpenny, European head of
currency research at Bank of Tokyo-Mitsubishi.

"But the net result is we are in a far worse position now
than prior to the election. The probability of Greece not being
in the single currency by the end of this year is considerably
higher and that eliminates risks to the upside in euro/dollar
for the next few months."

Mounting concerns about the Spanish banking sector and the
government's ability to check its budget deficit also weighed on
the euro and left investors fretting about whether the debt
crisis will ensnare Spain, the euro zone's fourth-largest
economy.

Data showing that U.S. consumer confidence hit a more than
four-year high in early May boosted risk sentiment and buoyed
the dollar against the yen, which last traded down 0.1 percent
at 79.84.

Separate U.S. data showed producer prices unexpectedly fell
in April, a sign of easing inflation pressures that could give
the Federal Reserve more room to help the economy should growth
weaken.

(Additional reporting by Nia Williams; Editing by Leslie Adler)