Euro slips versus dollar after weak German data

* German imports, industrial output fall in June
    * Prospect of ECB action to help Spain, Italy limits decline
    * Sterling advances after BoE inflation report


    By Wanfeng Zhou
    NEW YORK, Aug 8 (Reuters) - The euro edged lower against the
dollar on Wednesday, pressured by soft German economic data, but
losses were limited by hopes the European Central Bank may soon
take action to lower Spanish and Italian borrowing costs.
    Adding to pressure on the euro were comments from Eurogroup
President Jean-Claude Juncker that a Greek exit from the euro
zone would be manageable but is not desirable. 
    Industrial output in Germany, the euro zone's biggest
economy, fell more than expected in June. Separate data showed
German imports fell in June for the second time in three months,
and exports also dropped. 
    "The reports reminded investors that regardless of what the
ECB does to bring down government borrowing costs, the real
economies of Europe, even Germany's, continue to decline," said
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington.
    The euro fell 0.4 percent to $1.2355, after hitting a
one-month high of $1.2443 on Monday. It hit a session low of
$1.2325 after dropping past reported stop-loss orders at
$1.2350, before recovering slightly.
    Traders said the euro's outlook remained positive on the
daily charts for as long as $1.2132 minor support holds, which
is this month's low.
    The euro zone common currency has staged a rebound since
hitting a more than two-year low of $1.2040 late last month
after ECB President Mario Draghi said the bank would do whatever
it takes to save the euro.
    Since Draghi's comments, "volatility has been pushed lower
and EUR is well supported. We would expect the euro to fall
within a broad range between $1.21 and $1.26, with a catalyst
for a breakout only emerging in September," said Camilla Sutton,
chief currency strategist at Scotia Bank in Toronto.
    The euro also fell against sterling, which rallied
 after Bank of England Governor Mervyn King appeared
cautious about future interest rate cuts, surprising investors.
The euro last traded down 0.6 percent at 78.85 pence.
    Against the dollar, sterling reversed earlier losses to hit
a session high of $1.5677. It was last up 0.2 percent
at $1.5653. Traders had sold the pound in recent days on
expectations that downbeat BoE forecasts would lead speculators
to position for more monetary easing.       
    The BoE slashed inflation and growth forecasts in its
Quarterly Inflation Report as the euro zone crisis continued to
take a toll. 
    The dollar slid 0.2 percent to 78.45 yen. The euro
lost 0.6 percent to 96.86 yen.
    The dollar has stayed in a range between 77.90 and 78.80 yen
for the past two weeks. But analysts said expectations of more
U.S. monetary easing may hurt the dollar.
    Boston Federal Reserve Bank President Eric Rosengren, who is
known to favor a more activist approach to stimulating growth,
said on Tuesday the Federal Reserve should launch another
bond-buying program of whatever size and duration was necessary
to get the economy back on its feet. 
    Traders also said there was potential for fund repatriation
by Japanese institutional investors, which could also weigh on
the dollar against the yen in the near term.
    August typically sees large bond redemptions in U.S.
Treasuries as well as coupon payments, and traders say Japanese
investors holding Treasuries could potentially sell the dollar
against the yen to bring home some of the proceeds.