The euro recovered from early losses on Friday after Pakistan dismissed rumors of a coup while Asian stocks fell as investors fretted about the outlook for corporate earnings.

European shares were set to open steady, according to financial spreadbetters, while U.S. equity futures were up 0.4 percent.

The dollar <.DXY> eased 0.2 percent against a basket of major currencies, pulling back from an overnight rally as investors unwound long dollar positions ahead of the year-end.

Greece's fiscal woes continued to weigh on the euro but the currency found support after Pakistan dashed rumors of a coup, which in early trade had sent it skidding to a nine-month low against the safe-haven Swiss franc.

By the afternoon the euro was up 0.3 percent at $1.4380, rebounding from a three-month low of $1.4304 on Thursday.

Pakistani President Asif Ali Zardari said there was no coup, dousing rumors that started after a government minister suspected of corruption was barred from leaving the country.

Asian stocks slipped as investors became cautious about companies' earnings prospects and shares of resources companies were sold in reaction to an overnight drop in the price of gold.

We have already suggested that investors may be setting up for portfolio readjustments heading into the new year, and still believe we could see gold tumble considerably further before the year is done, Investec Bank (Australia) Ltd said in a research note.

The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS>, which has rallied more than 60 percent this year, was 0.6 percent lower.

In Japan, the Nikkei share index <.N225> dipped 0.2 percent, paring most early losses and the five-year government bond yield slid to a four-year low after the Bank of Japan said it would not tolerate deflation, suggesting further monetary easing was possible.

TELSTRA TUMBLES

Asian resources stocks were hit after gold fell 3 percent in New York while banking shares, including HSBC <0005.HK>, lost ground after international regulators proposed tough new capital protection rules from 2012.

HSBC shares in Hong Kong fell 1 percent, extending a 3.5 percent slide in London.

The gold price stabilized, rising to $1,105 an ounce from a New York close at $1,097.80, but is about 10 percent below a record high of $1,226.10 reached on December 3.

Oil meanwhile edged up 0.4 percent to $72.96 a barrel, supported by positive U.S. factory activity data.

Asian equity investors are likely to remain cautious next week as they seek to hold onto stellar gains this year.

Nouriel Roubini, one of the few economists to have accurately predicted the magnitude of the global financial crisis, warned that global markets have rallied too much, too soon, too fast.

However, he said an imminent correction was unlikely because a cheap dollar would continue to encourage investors to seek higher-yielding assets for a few months. Roubini sees a dollar rebound in 6-12 months.

In Australia, shares of phone company Telstra tumbled 3.4 percent after the company cut its sales revenue forecast.

The country's biggest brewer, Foster's Group , saw its shares drop nearly 2 percent after warning that a strong Australian dollar and weak U.S. demand would cut profits at its wine business.

Some analysts have warned that investors of Australian equities have not sufficiently priced in the impact of the Aussie dollar's 40 percent surge this year.

It's been pushed to the back of people's minds, but the currency is certainly coming home to roost. It is adding to the nervousness in our market, said Daniel Manley, a dealer at Burrell & Co in Australia.

(Additional reporting by Victoria Thieberger in MELBOURNE and Miho Yoshikawa in TOKYO; editing by Kazunori Takada)

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