FOREX-Euro rises on news of Greek aid package

* Euro rebounds after hitting 1-year low earlier

* IMF sees aid to Greece worth 100-120 bln euros

* Market awaits further Greece developments, FOMC meeting

(Adds comments, details; changes dateline, previous LONDON, byline)

By Vivianne Rodrigues

NEW YORK, April 28 (Reuters) - The euro rose on Wednesday, after hitting a 1-year low against the dollar earlier, on news an euro zone/IMF aid package to for Greece is imminent and may be worth more than previously expected.

Traders said investors were also squaring short euro positions after it tumbled more than 1.5 percent on Tuesday, its biggest one-day percentage loss in a year.

A eurozone/IMF aid package for Greece will be worth 100 to 120 billion euros ($132.6 - $158.8 billion) over three years, according to IMF Managing Director Dominique Strauss-Kahn, a member of German parliament for the opposition Greens said. For details, see [ID:nBAT005353]

And European Central Bank President Jean-Claude Trichet said he was confident of a good conclusion to the negotiations. [ID:nWLA2661]

"The tone is a tad more upbeat today with news that the negotiations of an aid package for Greece are moving on," said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut. "There's also short-covering after yesterday's drop in the euro."

In morning trading in New York, the euro was 0.5 percent higher at $1.3219 EUR=, after hitting a one-year low at $1.3143, according to Reuters data.

But Bourdeau said that looking forward, upside potential for the single currency is limited.

Investors worry the euro zone debt crisis is spreading. And the euro was stung earlier by a surge in Greek government bond yields, a day after ratings agency Standard & Poor's cut Greek debt to junk level and downgraded Portugal, sparking a wave of risk aversion, pushing European stocks lower earlier . [ID:nLDE63P0LU]

Analysts said Portugal's downgrade reflected wider credit risks in the euro zone, which could create cracks in the euro system and further batter the single currency.

"The euro is going to remain under pressure given a lack of clarity on the euro zone outlook -- whether there will be more contagion to other euro zone economies, and what concrete structural reforms are going to take place in Greece," said Phyllis Papadavid, currency strategist at Societe Generale.

German Chancellor Angela Merkel was due to make a statement later on Wednesday after meeting Strauss-Kahn. [ID:nBAT005350]

The euro has fallen below long-term support levels in recent months, including $1.3405, a 61.8 percent Fibonacci retracement of its rally from its 2008 trough to its 2009 peak.

This points to the possibility of further declines. A 76.4 percent retracement lies at about $1.2990.

The yen fell, giving back some ground after rallying broadly on Tuesday. The euro EURJPY=R rallied 1.6 percent to 124.62 yen EURJPY=R.

In the United States, the Federal Reserve is widely expected to keep U.S. interest rates on hold near zero after a two-day policy meeting that ends on later Wednesday, and stick to its commitment to keep them there for an "extended period". [ID:nN27160583]

(Additional reporting by Naomi Tajitsu in London) (Editing by Theodore d'Afflisio)