Euro close to 17-month low vs. USD

   
* Euro flounders near 17-mth low vs USD, 11-yr trough vs yen
* Chinese data key to risk sentiment in Asia
* Greek debt swap deal talks also in focus

By Ian Chua

SYDNEY, Jan 17 (Reuters) - The euro hovered just above a 17-month trough against the dollar early in Asia on Tuesday after Standard & Poor's dealt the euro zone yet another blow by downgrading the credit rating of Europe's bailout fund.

But reaction to the move by S&P, which came after Friday's mass downgrade of euro zone members, was muted as it was well expected. S&P itself said the decision was all but inevitable following the cuts to the creditworthiness of France and Austria, two of the EFSF's guarantors.

Trading overnight was subdued with U.S. markets shut for a holiday and the tone in Asia will be set by a batch of key Chinese data, including fourth quarter gross domestic product.

The euro last stood at $1.2663, not far off Friday's trough around $1.2623. Against the yen, the single currency was at 97.25, precariously close to an 11-year trough near 97.00.

"Short EURJPY remains one of our favoured 2012 trades and we have an end-Q1 target of 95.00," BNP Paribas analysts said.

There was talk of an option barrier at $1.2600 and stop loss orders around that level. A break below there would see the euro target its August 2010 low of $1.2588, and then around $1.2500 -- the trendline support connecting the euro's July 2001 low, early 2002 troughs and its June 2010 low.

The generally subdued market tone was clearly seen in the dollar index, which was little changed at 81.445, just off Friday's 16-month peak of 81.784.

On the yen, the greenback bought 76.80, still well within this month's range roughly between 76.60 and 77.20.

The market will get the latest update on the health of the Chinese economy around 0200 GMT, when December industrial production and retail sales are also due.

Analysts polled by Reuters expect China's economic growth to slow to 8.7 percent, from 9.1 percent, as global demand slackened. This could prompt fresh action from the government to ward off a hard economic landing.

Traders said any disappointment in the Chinese figures will hit demand for risk assets and commodity currencies like the Australian dollar.

The Aussie has held up remarkably well in the last few sessions even following S&P's mass downgrade of euro zone countries. It was last at $1.0304, with $1.0350/90 providing resistance.

Traders said the market was also keeping a close eye on talks between Greece and private sector creditors on a debt swap deal, which broke down last week but was expected to resume on Wednesday.

Cash-strapped Athens needs a deal with the private sector within days to avoid going bankrupt when 14.5 billion euros of bond redemptions fall due in late March.

A senior Standard & Poor's official told Bloomberg Television on Monday that he expected Greece will default shortly on its debt obligation.

"Whether there will be a solution at the end of the current rocky negotiations I cannot say," said Moritz Kraemer, the head of the agency's European sovereign ratings unit.

"There is a lot of brinksmanship on and a disorderly default will have ramifications on other countries but I believe policymakers will want to avoid that ... The game is still on."