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TOKYO (Reuters) - The euro suddenly spiked lower on Friday after an Italian minister said that Italy should quit the single currency and revert back to the lira.
Welfare Minister Roberto Maroni told the Repubblica newspaper that Italy should hold a referendum to decide whether to return to its old currency.
That sent the euro tumbling to $1.2220 from $1.2285 in a matter of minutes as the report added to concerns about the European Union's outlook -- politically and economically.
By 0647 GMT, the euro had recovered to around $1.2260, little changed from late U.S. levels.
The single currency slid to 132.30 yen from 132.62 yen on the report.
The euro's fall also boosted the U.S. currency against the yen, which hit the day's high at 108.25 yen.
Maroni also said that European Central Bank President Jean-Claude Trichet was one of the people chiefly responsible for the "disaster of the euro".
Traders said the market had jumped on the interview to further sell the euro, which had hit an eight-month low earlier in the week after the Netherlands followed France in overwhelmingly rejecting the EU constitution.
Many traders said that political uncertainty and sluggish economic growth in the euro zone would continue to loom over the single currency.
"There aren't a lot of reasons to buy the euro, so in time, we should be seeing more selling," said Shigeru Komatsu, a trader at Sumitomo Trust and Banking.
Traders said the dollar had room to rise against the yen if U.S. non-farm payrolls figures for May, due at 1230 GMT, met or exceeded forecasts, possibly rising above a seven and a half month high of 108.90 yen.
Even if the data is weaker than expected, selling should be limited given the dollar's solid tone this year, they said.
At the same time, a figure in line with or exceeding forecasts could push the euro back down into the $1.21 region, market participants said.
Economists expect the payrolls data to show that 185,000 new jobs were created, compared with 274,000 in April.
Solid jobs growth would likely support expectations that the Federal Reserve will keep raising U.S. rates, which stand at 3 percent after eight consecutive rises in the past year.
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