Euro rallied from at least 3 weeks vs dollar, attentive EU summit

NEW YORK (Reuters) - The euro rebounded on Monday from a three-week low against the dollar, after the market saw some increase in risk-seeking, but the euro remained under pressure on fears about the ability of Greece for financial aid.

Traders said the rally could be short-lived, with investors warning before a meeting of European Union leaders on Thursday and Friday.

European leaders have sent mixed signals about possible aid to Greece, including Germany, which has urged Athens to solve their debt problems alone, while Italy has supported the EU assistance.

The euro has fallen more than 5.0 percent against the dollar so far this year due to the advance of the fears about the sustainability of debt in Greece and other euro zone countries.

Analysts say the failure to reach an early agreement on Greece at the meeting this week, along with weak economic growth, will delay a rate hike from the European Central Bank, adding more pressure to sell the euro.

"This will be an important event, but given the recent tug of Europe on how to help Greece, expectations are very high," said Vassili Serebriakov, currency strategist with Wells Fargo Bank in New York.

UBS AG, one of the largest operators of currencies, the euro is operating at $ 1.30 in three months.

At the close of trading in New York, the euro rose 0.1 percent to $ 1.3548 after touching briefly on a session low of $ 1.3568. In the beginning of the day, the currency hit a three-week low of $ 1.3464.

The European currency traded close to 1.4310 Swiss francs, and hit its lowest level in a week against the yen.

The divisions within the EU on how to help Greece have sparked a selloff in the euro, taking it to lose 10 percent since December.

The Foreign Minister of Germany, Guido Westerwelle, said Monday he did not want German or European money as financial aid was handed to Greece, as this would relieve the pressure to adjust its finances Athens.

The dollar remained within a narrow range against the yen at 90.16 units, with margins of 89.75 and 91.00.

Greece said over the weekend that could stand firm without requiring funding until late April, but is pressing its EU colleagues for a particular aid package in order to cut its borrowing costs.

"This brinkmanship between Greece and the rest of the region will likely reach its peak this week," JPMorgan analysts said in a note to clients.

"If the rest of the region is not proposing something that is acceptable to Greece at this summit, then they could well go to the IMF," he added.

Investors will closely monitor economic data this week, including reports on housing on Tuesday and Wednesday, and testimony from Federal Reserve Chairman Ben Bernanke, on Thursday.