BRUSSELS (MNI) - Irish bond spreads Wednesday hit their widest level since the start of European Monetary Union as traders speculated that the country won't be able to manage its large budget deficit, exacerbated by the expensive problems of its troubled banking system.

The Irish government is meeting on Wednesday to debate the future of Anglo Irish Bank after saying on Tuesday that it would keep the bank on state funded life-support until the end of the year.

LONDON, Sep 8 (MNI) - Continued concerns over eurozone sovereign debt acted to weigh further on the euro during European morning trade, with sales reversing an early recovery attempt that saw rate push up to $1.2733 before dropping back to $1.2660.

Late morning saw rate edge back above $1.2700, disregarding a weak release in German industrial production data, as a short squeeze developed ahead of the NY open.

LONDON, Sep 8 (MNI) - M&A-linked sterling demand into early Europe provided the main drive as the pound made general gains, cable pushing up to a high of $1.5495, while euro-sterling was able to extend its corrective pullback from Monday highs of stg0.8390 to stg0.8202.

Release of stronger-than-forecast Halifax house price data and UK industrial production/manufacturing output coming in at expected levels, also aided sterling's recovery. The pound held off best levels ahead of the NY open, though the underlying tone remains buoyant.

BRUSSELS (MNI) - Eurozone banks can't depend on the European Central Bank's exceptional measures forever and the central bank is likely to continue to withdraw the support next year, National Bank of Belgium Governor Guy Quaden said in an interview published by a Belgian national newspaper on Wednesday.

BEIJING (MNI) - The Chinese banking regulator has acknowledged the systemic risk posed by the country's lenders, urging them to tighten up risk controls.

The statement from Liu Mingkang, who is director of the China Banking Regulatory Commission, gave no indication that his agency believes risk has risen although it was making a general call for an improvement in banking standards.

"The potential outbreak of systemic bank risk shouldn't be ignored... bank liquidity management is also weak," Liu told commercial bank executives in a meeting.

SINGAPORE, Sept. 8 (MNI) - Dollar-yen hit a new 15-year low, sending Japanese stocks down sharply, in a generally quiet market after the release of stronger-than-expected machinery orders for July, although a stream of policymaker comments on the currency was keeping trade in check.

Japan's core private-sector machinery orders surged by a seasonally adjusted 8.8% in July from the previous month, posting the second straight m/m rise after rising 1.6% in June and slumping 9.1% in May, the Cabinet Office said on Wednesday.

XIAMEN, Fujian Province (MNI) - There are no signals suggesting sharp yuan volatility, Minister of Commerce Chen Deming told reporters here today.

"I haven't seen any signs of large-scale volatility," he said.

Chen also said that the forces of supply and demand will decide the exchange rate. He said that China will continue to reform the exchange rate formation mechanism.

"We need to maintain economic stability and currency stability," he said.

BEIJING (MNI) - China bought Y640.8 billion in short-term Japanese bills in July, according to data published by Japan's Ministry of Finance on Wednesday.

China's net holdings stood at Y583 billion versus Y456.7 billion the previous month.

However, China also sold Y57.7 billion in medium- to long-term Japanese bonds in July.