(Repeats to more subscribers)
* Euro well supported, technical charts look positive
* Bank funding concerns rise, seen positive for dollar
* Options point to high risk of more franc volatility
* Dollar/yen plunges to record low (Updates prices, adds quote)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 19 (Reuters) - The euro rebounded on Friday as an early sell-off lost steam on central bank demand and technical buying, although the currency was vulnerable due to fears about euro-zone banks and a gloomy global outlook.
The U.S. dollar, meanwhile, plunged to a record low against the yen, with traders emboldened by a Wall Street Journal report citing Japan's top currency official saying Japanese authorities do not plan to intervene often.
The euro rose to a session high of $1.44530
"The rebound in the euro seems to have been timed with the recovery in equities, which have come back from the worst points of the day," said David Mann, regional head of research for the Americas at Standard Chartered in New York.
U.S. stocks <.N> were mixed in midday trading, while an index of European shares <.FTEU3> fell 1.7 percent.
"But it would be very difficult to sustain the euro's rally. I don't think we should read too much into today's moves. The market is very choppy and cautious," Mann said.
In midday New York trading, the euro was up 0.5 percent against
the dollar on the day at $1.44050
And there are some asset managers buying into a "strong- euro" notion. Axel Merk, president of Merk Investments in Palo Alto, California, for instance, has started significantly buying euros despite the euro-zone sovereign crisis.
"Compared with the United States and Japan, the euro zone has been spending and printing less money. That is why the euro here is trading near $1.45 and not parity," said Merk, who manages assets of more than $750 million.
He added that the euro has been the least volatile of the major currencies and, in fact, may be a bedrock of tranquillity in times of distress.
DOLLAR/YEN HITS RECORD LOW
The dollar sank to an all-time low against the yen beneath 76 yen
Traders said investors have been emboldened by the Wall Street Journal interview of Takehiko Nakao, Japan's vice finance minister for international affairs. He said there was no reason for the market to view the yen as a flight-to-safety currency, adding that the yen's recent surge does not reflect economic fundamentals. [ID:nN1E77I0EC]
John McCarthy, director of foreign exchange at ING Capital Markets in New York, said the dollar/yen pair could fall to 75 yen before Japan intervenes.
The safe-haven Swiss franc also rose, benefiting from demand for currencies perceived to offer a safe haven, although its gains were capped by speculation that Swiss authorities will step in again to rein in the currency.
The euro
In the options market, euro versus Swiss one-month implied vols
remained at extremely high levels around 20 percent
Investors have been dumping higher-risk assets after weak U.S. economic data on Thursday added to the view the global economic recovery is faltering.
On the other hand, concerns that euro-zone policy-makers are dragging their feet over the region's debt problems are also expected to weigh on the single currency.
The ICE Futures' dollar index <.DXY> fell 0.6 percent to 73.832 as a result of the euro's rebound.
Many analysts expect the dollar, which has also struggled due to U.S. fiscal problems, will be supported on the view that demand for the greenback will rise if signs grow that financial institutions may be facing funding problems.
Analysts said investors were becoming highly sensitive to signs of funding strains, following news earlier in the week that an unnamed euro-zone bank had borrowed $500 million in one-week funds from the European Central Bank. [ID:nLDE77G0DB] (Additional reporting by Nick Olivari; Editing by Jan Paschal)