The euro fell to a session low versus the dollar on Tuesday after results of a Greek Treasury bill auction showed the market still demanded a high premium to hold Greek assets.
Greece easily sold its allocation of 6 and 12-month T-Bills, raising 1.56 billion euros with the inclusion of non-competitive bids, but at a yield which was costly for the debt-laden country.
The euro rose briefly in the immediate aftermath of the auction as traders reacted to a strong bid to cover ratio.
However, analysts said attention then shifted to the yield Greece had to pay -- more than double those paid at auctions in January of bills with similar maturities.
"The higher yield confirmed the high risk premium demanded for Greek assets and that has put the euro bears in a stronger position," said Audrey Childe-Freeman, currency analyst at Brown Brothers Harriman.
"The euro was already showing signs of fatigue," she said.
On Monday, the euro climbed to a near one-month high of $1.3691 after euro zone finance ministers agreed at the weekend on a financial aid package for Greece, before paring gains as investors sought clarification about the plan.
At 1132 GMT, the euro traded at $1.3587, recovering from a session low of $1.3556. Traders said a Swiss bank bought euros for an option at $1.36 expiring later in the day.
"(The auction) does not really change the underlying position that Greece has very tough times ahead, it's going through a deep recession and that's going to lead the debt to GDP ratio to surge higher," said Ben May at Capital Economics.
Despite concerns about Greece, the euro was supported from a technical perspective. Technical analysts at UBS said clearance of $1.3591 would open the door to $1.3816, a level last hit in mid-March.
Versus the yen, the euro slipped 0.2 percent at 126.45 yen. It slipped as low 125.71 yen in earlier trade as investor caution crept in regarding the Greek aid plan.
The yen was pressured earlier by a draft from a group of Japanese ruling party lawmakers which suggested the dollar should be kept around 120 yen..
The dollar hit the day's high of 93.42 yen on the proposal, before retreating to 93.00 yen, down 0.3 percent on the day.
PRICE FORECAST
The dollar hovered above a two-week low hit against the yen in Asia as stocks in the region slipped. Some said a report that the Bank of Japan may slightly revise up its consumer price forecast for the next fiscal year also helped the yen.
BOJ Governor Masaaki Shirakawa said annual consumer price falls were expected to narrow as the output gap shrinks but that the central bank did not rule out any option.
The yen remained sensitive to market expectations on the Chinese yuan. Chinese President Hu Jintao told U.S. President Barack Obama Beijing would "firmly stick" to its own path for reforming the yuan's exchange rate, the official Xinhua news agency said.
Hu added the yuan's gains would neither balance Sino-U.S. trade, nor solve the U.S. unemployment problem.
