* Euro gains capped by options, fiscal concerns linger
* Euro slips from 2-mth high vs yen, 1-week high vs dollar
* Greek sale of 7-yr debt aids sentiment in near-term
(Adds comment, details)
By Neal Armstrong
LONDON, March 30 (Reuters) - The euro hit a two-month high
against the yen on Tuesday on relief that Greece was able to
raise funds from the market, though gains were quickly trimmed
as wider euro zone fiscal concerns weighed on sentiment.
Extending its rally from last week, the euro hit its
strongest versus the yen in nearly two months, while edging up
to a one-week high against the dollar as traders locked in
profits on short euro positions, which peaked last week.
But analysts saw limited upside potential given that the
euro zone's debt problems and weak growth mean the European
Central Bank is in no rush to hike interest rates.
"The uncertainties surrounding Greece and wider fiscal issue
are still a problem," said Daragh Maher, senior currency
strategist at Credit Agricole CIB in London.
The euro was supported by position squaring, while Greece's
sale of 5 billion euros of seven-year debt on Monday eased some
risk aversion over its massive debts.
"The fact that Greece has come to market encouraged some
people to square up their euro shorts which were at extreme
levels," said RBS currency strategist Paul Robson.
By 1215 GMT, the euro <EUR=> was back to flat on the day
versus the dollar after hitting $1.3539 in early European trade
according to Reuters data, its strongest since March 23.
"The subsequent move back from the highs looks like it has
been flow-driven," Robson added.
The euro has gained roughly 1.5 percent versus the dollar
since Friday, when euro zone leaders announced plans for a
safety net for Greece, which would include the International
Monetary Fund, should Athens need help in servicing its debts.
Market participants said the euro's upside was capped around
$1.3500, where as much as 1 billion euros' worth of options were
reportedly set to expire at 1400GMT.
The euro <EURJPY=R> climbed half a percent on the day to
125.44 yen according to Reuters data, its strongest since early
February, before pulling back to 124.75 yen.
Technical analysts said a daily close above the 125.25 level
would complete a head-and-shoulders reversal pattern, paving the
way for fresh upside potential.
Traders have crept back into the euro after bets the single
currency will fall hit a record high last week, according to the
latest data from the Commodities Futures Trading Commission.
DOLLAR DOWN
The dollar <.DXY> fell around 0.2 percent against a currency
basket to 81.155, its lowest in nearly a week, as European
shares <> rose 0.3 percent and oil prices <CLc1> were
supported around $82/barrel.
The U.S. currency edged up against the yen to 92.52 yen
<JPY=>. Traders reported strong UK clearer selling capping the
pair.
Some analysts say that if U.S. non-farm payrolls data due on
Friday is strong it may boost the dollar as this would suggest
the Federal Reserve may need to raise interest rates later this
year.
The Australian dollar <AUD=D4> rose to its strongest in more
than a week at $0.9215, after an Australian central bank watcher
argued the Reserve Bank of Australia (RBA) was likely to lift
interest rates next week to 4.25 percent.
(Additional reporting by Naomi Tajitsu; Editing by Nigel
Stephenson)
