* Euro steadier after retreating from Monday’s highs
* Focus on outcome of ECB policy meeting
* Aussie Q1 GDP due at 0130 GMT
By Ian Chua
SYDNEY (Reuters) - The euro stayed on the backfoot in Asia on Wednesday, having lost ground after Spain warned it was losing access to credit markets and finance ministers from major economies took no immediate steps to assuage fears about Europe’s debt crisis.
News that Moody’s had downgraded a swathe of German and Austrian banks hardly helped the market’s fragile mood.
The single currency retreated from Monday’s high of $1.2542 to last trade at $1.2447. Keeping markets wary, the latest business surveys indicated that all of the euro zone’s major economies are now in various states of decline.
Still, the euro managed to hold above a two-year trough around $1.2286 plumbed last Friday. It has slumped more than 6 percent in May alone and there appears to be some support for the currency at the lows.
Markets were not prepared to get too bearish for now just ahead of the outcome of the European Central Bank’s policy meeting due later in the day.
“While headlines on Spain will continue to be the key catalyst for sentiment, the ECB meeting today will be critical,” analysts at BNP Paribas wrote in a note.
“Our economists expect a 25-basis-point-cut given the marked deterioration in the economic outlook and slumping credit growth. June provides the ECB with the opportunity to cut rates in line with the release of the next round of economic projections. We anticipate both GDP and inflation to be tweaked lower.”
Also, European Union leaders appeared to be actively working towards a plan for deeper political integration, long pressed by the United States and financial markets as a way to underpin the future of the euro currency.
Other currencies benefiting from a lightening of very bearish positions included the embattled Australian dollar, which also suffered a drop of over 6 percent last month.
It kept a good chunk of its overnight gains to last stand at $0.9750, having risen as high as $0.9804 on Monday. This helped it stay well off Friday’s 8-month trough of $0.9581.
Part of the Aussie’s resilience reflected the Reserve Bank of Australia’s (RBA) decision on Tuesday to trim interest rates by 25 basis points, instead of a more aggressive half-a-percentage-point move.
The Canadian dollar held firm after the Bank of Canada continued to signal it might have to raise rates, even though it softened its recent hawkish language in reaction to a sharp deterioration in global financial conditions.
The retreat in the euro helped the U.S. dollar climb against a basket of major currencies. The dollar index rose 0.5 percent to 82.800, bouncing off a one-week low.
Against the yen, the greenback climbed to 78.73 after Japan signaled it was prepared to intervene to curb its currency, a threat that saw the Japanese currency ease broadly.
Even the euro rose to 98.00 yen, putting more distance from a near 12-year low of 95.50 set on Friday.
There is not a lot of major economic data out of Asia on Wednesday, but Australia has first quarter gross domestic product due at 2130 EDT.
Forecasts centered on a rise of 0.5 percent in the quarter, taking the year-on-year reading to 3.2 percent. Traders said a surprisingly strong outcome could prompt a further squeeze in short Aussie dollar positions.
Editing by Wayne Cole