* Euro off 1-month high, no reaction to EU summit
* Google drama prompts some profit-taking
* Yen pressured by BOJ easing expectations
By Hideyuki Sano
TOKYO, Oct 19 (Reuters) - The euro hovered below its one-month high against the dollar on Friday having been left unmoved by the European summit, while the yen wobbled near a two-month low against the dollar as speculation mounted over the possibility that the Bank of Japan will take fresh stimulus measures.
European leaders, meeting on Thursday in Brussels, made some progress towards establishing a single banking supervisor for the currency bloc, but, as expected, talked little about immediate plans for debt-ridden problem members, Spain and Greece.
The euro stood almost unchanged from late U.S. levels at $1.3074, off Wednesday's one-month high of $1.3140.
The dip was a small setback for the common currency, and some traders expected the euro to test last month's peak of $1.3173 again soon. Breaking above that level would take the euro to highs unseen since early May.
"It seems like investors are coming back to the euro zone (bonds). There's a sense of ease that the European Central Bank will buy and support the market," said a trader at a European bank.
Sentiment had been briefly shaken on Thursday after earnings from Google fell well short of expectations. Adding to the drama, the results were prematurely released during the trading session and caused Google stocks to plummet some 9 percent before a trading halt was triggered.
That gave investors cause for a shift against risk, which led to profit-taking against the euro and commodity currencies that rallied this week on talk of a credit line for Madrid and on Moody's decision to leave Spain with its investment grade rating for now.
"Our survey of EUR/USD positioning suggests a market betting on a wide range trading environment strategically, while tactically looking to sell EUR/USD on rallies," Societe Generale strategist Sebastien Galy wrote in a client note.
The EU summit was hardly helped the euro, with traders confused over what had been agreed.
Earlier, a French source said direct recapitalisation of troubled banks by the European Stability Mechanism bailout fund could begin in the first quarter of 2013, but a German government source said it was unlikely.
END OF EUPHORIA?
Some strategists think the euro's rally since late July has made the currency a bit expensive given the euro zone's dire economic outlook.
Makoto Noji, senior strategist at SMBC Nikko Securities, reckoned the euro's fair value was below $1.30 given signs of weakness in the German economy.
"The euro has been bought lately on euphoria over the Fed's QE3 and the ECB's bond buying plan and so on. But the German economy, which is the engine of the euro zone, is weakening and further rise in the euro would be out of sync with economic fundamentals," he said.
Still, the euro was on track to end the week up nearly 1 percent against the dollar and almost 2 percent higher on the yen as investors have further unwound short positions in the euro that they had taken on fears that the euro zone could break up.
Easing worries over the euro zone and some recent strong U.S. data readings has helped to keep the yen near five-month lows on the euro and a two-month trough on the dollar.
The dollar traded at 79.34 yen, flat against late U.S. levels but near a two-month high of 79.47 yen set on Thursday, while the euro fetched 103.67 yen, near Thursday's five-month high of 104.145 yen.
Speculators recently sold the yen on expectations that the Bank of Japan will take another easing step at its next policy meeting on Oct. 30, following up on its easing last month.
But the dollar's advance is likely to slow as Japanese exporters are waiting to sell, and immediate resistance is seen at 79.66 yen, its August peak.
The Australian dollar was steady at $1.0365, having hit a three-week high of $1.0415 on Thursday.
The British pound stood near four-month low against the euro ahead of public sector borrowing data. A weak reading could intensify worries about Britain's widening budget deficit and the risk of a downgrade to its AAA rating.
The euro stood at 81.40 pence, a whisper away from Thursday's four-month high of 81.475 and near its June peak of 81.63.
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