SYDNEY (Reuters) - The euro was caught in choppy trade on Tuesday after euro zone and International Monetary Fund officials clinched agreement on a new debt target for Greece in a significant step towards releasing a much-needed aid package for Athens.
The euro briefly gained a quarter of a cent to $1.3007, its highest in a month, before easing to $1.2985, still up 0.1 percent on the day.
Against the yen, it initially rose around 20 pips to 106.62, not far from a seven-month high around 106.98 on Friday, before edging lower to 106.48.
"It was not a huge reaction because (the deal) was already priced in," said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
He said the euro should start losing momentum and ease around a cent by the end of the week.
"Economic data in Europe is getting worse and you also have the unresolved U.S. fiscal cliff in the background," he added.
The agreement, which came after three weeks of discussion, involves a reduction of Greece's public debt to 124 percent of GDP in 2020. Talks are still continuing on the methods to be used to lower the debt burden.
The deal opens the way for a major aid instalment needed to recapitalise Greece's teetering banks and enable the government to pay wages, pensions and suppliers in December.
Greece is facing debt payments mid-December.
The dollar nursed its recent losses against the yen and last fetched 82.05 yen, having slipped 0.4 percent on Monday. Traders said some investors unwound long positions in the U.S. dollar built up in recent weeks.
The Japanese currency has been under pressure in recent weeks on mounting speculation that a new government after next month's general elections will force the Bank of Japan to ease monetary policy aggressively.
It has fallen to seven-month lows against the U.S., Aussie and New Zealand dollars.
There was no major data expected in Asia and investors were awaiting European reports, including German import and export prices, French consumer sentiment and the second release of UK Q3 GDP figures.
(Reporting by Cecile Lefort; Editing by Richard Pullin)