By Kosaku Narioka TOKYO (MarketWatch) -- The euro fell against the dollar and the yen in Asia on Thursday as investors again became cautious about potential developments in the European sovereign debt crisis. The falls came after the single currency surged Wednesday following a smooth Portugal bond auction, but market participants remain concerned about European sovereign debt issues ahead of large bond auctions by Spain and Italy later in the day. Spain will auction EUR2 billion to EUR3 billion of five-year government bonds while Italy will auction up to EUR6 billion of five-year and 15-year treasury bonds. "The market is focused on the auction of bonds issued by Spain, the fourth-largest economy in the region," said Junichi Ishikawa, a market analyst at FXOnline Japan. "There is a strong concern in the market that accelerated euro selling may resume, depending on the outcome of the auction." The falling trend of the euro will likely continue, said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking. "I don't expect a crash like the one that happened last spring, but the euro may fall to $1.26 depending on circumstances" in the coming weeks, Nishida said. The euro was at $1.3104 as of 0450 GMT from $1.3135 late Wednesday in New York and at Y108.80 from Y108.99, according to EBS. The dollar was at Y83.03 from Y83.00. The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 80.169 from 80.019. Meanwhile, the Australian dollar fell to US$0.9946 from US$0.9964 overnight after December jobs data suggested continued tightness in the labor market could complicate rebuilding efforts after the devastating floods now ravaging Queensland. On Thursday, government data showed Australia's unemployment rate fell to a seasonally adjusted 5.0% in December from 5.2% in November as the number of employed rose 2,300 while the number of people in work or seeking employment declined. Economists on average had expected an unemployment rate of 5.1% in December, with the number of employed up 25,000. Although the result was somewhat mixed, HSBC NZ chief manager Daniel Brdanovic said he doesn't expect January jobs data to be very positive either; "It just puts a further dampener on the Aussie picture for the short term anyway." --Geoffrey Rogow and Rebecca Howard in Sydney contributed to this article.

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