Market holidays in both Japan and the United States meant the foreign exchanges were exceptionally quiet and traders were reluctant to push the single currency out of its trading bands.

Analysts said wariness that the Group of Seven industrialised power could stage a repeat of their concerted euro-supportive intervention on September 22 had not dissipated and was a major factor behind the euro's current stability.

"The ECB's objective was to stabilise the euro. They have succeeded in that by leaving a fear in place that at around $0.86/$0.8650 they could intervene again," said global economist at HSBC Markets Adam Cole in London. "Were it not for this fear, the euro would be much lower than where it is trading now."

Against the yen, the single currency was getting additional support from news that Japan's Chiyoda Mutual Life Insurance Co had failed with total debts of 2.94 trillion yen ($26.95 billion), marking Japan's biggest corporate bankruptcy and spurring doubts about the strength of Japan's recovery. But with Japan and the United States on holiday, analysts said it was worth waiting until the reaction of financial markets on Tuesday to assess the full impact of the troubled insurer.

"It tends to suggest that all is not rosy for the Japanese economy," said Mr Audrey Childe-Freeman, European economist at CIBC World Markets in London.

"It certainly cannot help the (yen's) sentiment, but we haven't seen Japan reaction to the news yet."

By 1200 GMT the euro was hovering around $0.87, more than a third of a cent above $0.8659, Friday's trough since the intervention according to Reuters data.Against the yen, the euro was holding around 94.70/75, a quarter yen above Friday's late North American trading levels around 94.50 yen. The thinness of trading volumes was keeping traders on their toes as analysts said an intervention could be more successful if performed in such thin market conditions."The market is very thin and this sort of situation makes intervention more successful. So it is not the day to go down and try $0.86." said Mr Ryan Shea, international economist at Bank One in London.

Analysts said dealers were still assessing the implications of last Thursday's quarter percentage point interest rate increase by the European Central Bank, which was making the euro more appealing by narrowing its gap with the US rates, but could have an impact on growth.

"On the domestic front, there is no reason to be hiking rates and we don't see the weakness of the euro as an enormous threat to euro-zone inflation," said Mr Cole at HSBC.

(Reuters)