FOREX-Euro firms, yen bounces from recent lows

* Euro rises on hopes of a Greek debt breakthrough
* USD/JPY dips on month-end exporter selling
* US GDP data awaited

By Anirban Nag
LONDON, Jan 27 (Reuters) - The euro edged up on hopes
of a breakthrough in Greek debt talks on Friday, while the yen
was on track to post its biggest daily gain in a month against
the dollar, recouping most of the losses made earlier this week.
Athens is locked in talks with its private creditors to
restructure its debt and needs a deal quickly to avert an unruly
default when a major bond redemption comes due in March.
The European Union's top economic official Olli Rehn said a
deal was likely at the weekend, giving a boost to the euro.

The euro was 0.3 percent higher on the day at $1.3139
, having tripped stops above $1.3120, with traders citing
bids at $1.3070 and $1.3050.
"I wouldn't rule out a rise to the $1.3200/$1.3250 area but
the upside looks quite constrained ... There are a lot of
negatives that could bring the euro recovery to a halt fairly
rapidly," said Ian Stannard, currency strategist at Morgan
Stanley.
Many see the euro's bounce as limited due to uncertainties
that a deal on Greek debt will be reached, while investors were
also becoming cautious about the risks of a default in Portugal.

"Investors seem to have grown used to Greek debt swap talks
dragging on," said Ankita Dudani, G10 currency strategist at
RBS. "What the real risk for the euro is contagion from a
disorderly Greek default and whether Portugal needs another
bailout."
Yields on Portuguese government bonds set fresh euro-era
highs on Friday, extending their recent rise.

YEN GAINS
The euro underperformed against the yen, with the common
currency down 0.3 percent at 101.16 yen as the
Japanese currency recovered broadly from lows struck this week.
The dollar fell around 0.6 percent to 76.87 yen on
EBS, leaving the yen on track for its biggest daily gain since
late December. Traders said Japanese corporates sold the dollar
which had been drifting lower after hitting a two-month high
this week.
This prompted hedge funds to follow suit, pushing the
greenback through support at its 100-day moving average of 77.20
yen.
The dollar hit a two-month high of 78.29 yen on Wednesday,
but the rally stalled right below resistance at its 200-day
moving average. It reversed further after the U.S. Federal
Reserve pledged to keep rates low for a prolonged period.
Dudani of RBS said with interest rate differentials moving
in favour of the yen, the dollar was likely to stay subdued
against the Japanese currency.
The greenback has been on the back foot since the U.S. Fed's
dovish statement on Wednesday. The dollar index was down
0.25 percent at 79.186, not far from a six-week low of 79.067.
However, analysts said the dollar was unlikely to stay under
pressure against the euro after some of the extreme bearish
positions against the common currency had been pared.
Chris Turner, chief FX strategist at ING, said investors
were underestimating the risks of a domino effect from Greece.
"Portugal could be a catalyst for a weaker euro in
February," he said. "The troika will be reviewing Portugal's
adherence to its bailout package, while bond investors are
already pricing a restructuring of Portuguese debt."
Still, the Fed's decision encouraged the use of the dollar
in carry trades and sparked big gains for commodities like gold
and copper, while the commodity-linked Australian and New
Zealand dollars hovered near three-month
highs.
Growth-linked currencies could get a boost from U.S. GDP
numbers for the fourth quarter. Forecasts are for an expansion
of 3 percent from a year earlier which would be a sharp
acceleration from 1.8 percent growth in the prior three months
and the quickest pace since the second quarter of 2010.