The euro retreated by a cent from highs on Friday of $0.9939, a stone's throw from the previous day's one-week highs, after German industrial orders fell by a seasonally adjusted 1.9 percent in December, on a month-on-month basis.

The data wiped some of the froth attached to the euro in theprevious session, following a quarter point rise in euro interest rates and news of an agreed 180 billion euro merger ($178.7 billion) between British and German telecom firms Vodafone AirTouch and Mannesmann AG.

"Soggy German orders were softer than expected," said RyanShea, international economist at Bank One in London.

"People are concerned that maybe the Euroland recovery isnot as strong as it was thought."

The euro dropped to technical support around $0.9830,before recovering slightly to $0.9850 by 1230 GMT.

The Swiss franc also languished against the dollar,after rallying by four centimes on Thursday following a 50 basis point rise in the Swiss key interest rate target.

The Swiss currency gave back two centimes to trade near 1.6350 francs.See-saw trade in the euro/dollar rate in the past 24 hourswas also down to wild gyrations in U.S. Treasury markets, which sparked talk in U.S. And Asian trading of heavy losses among U.S. Investment banks and hedge funds, analysts said. "The move in the bond market has been pretty big in the pastcouple of weeks - I'M Sure some people have lost money," said Glenn Davies, Chief economist at Credit Lyonnais in London.

Analysts said the international investment flows likelyafter Vodafone's hostile bid for Mannesmann was resolved as an agreed merger drove sterling to three-week lows against the euro beyond 62.50 pence and also helped the euro against the dollar earlier on Friday.

-- (Reuters)