* Single currency rises before euro zone ministers' meeting * Deal boost to euro seen limited by Greek economy risks * China cut required reserve ratio by 50 bps at weekend By Nia Williams LONDON, Feb 20 The euro rose on Monday after China's surprise move to ease monetary policy to stimulate growth and on mounting expectations that euro zone policymakers would finally approve Greece's second bailout, averting a messy default. Analysts said gains would be limited until the 130 billion euro bailout deal was signed off by euro zone finance ministers later on Monday, given numerous delays in recent weeks. Although financing gaps in Greece's debt reduction plans remained, a euro zone official said they were not big enough to risk derailing the process. The euro was seen as likely to rally in the immediate wake of a deal being signed, although it could run out of steam near its 2012 high around $1.3322 as the package was not expected to resolve Greece's underlying economic problems. The single currency was up 0.7 percent at a one-week high of $1.3248. Riskier assets, including stocks and commodity currencies, also rallied after China's central bank cut reserve requirements by 50 basis points over the weekend. Trade was expected to be subdued with U.S. markets closed for a public holiday, potentially exaggerating any price moves. "News about China reserve requirements and once again hopes that they (the euro zone) will reach an agreement with Greece are giving a positive opening to markets," said Niels Christensen, FX strategist at Nordea. "I think we will see a rally, but not a strong rally because we've been trading this topic for a long time. Even if we get a deal there are still issues about restructuring and how the portfolio of Greek bonds at the ECB will be dealt with." One of the terms of the deal will be a debt swap with private holders of Greek government bonds. The European Central Bank (ECB) is weighing up whether to allow Greek bonds held by national euro zone central banks' to be subject to the same writedowns as those of private investors. Although strategists saw a euro rally as limited, data from the Commodity Futures Trading Commission released on Friday showed euro shorts rose in the week to Feb. 14, suggesting scope for short covering. RISK RALLY The euro also hit a three-month high of 105.75 yen before slipping back to 104.23 yen, up 0.1 percent on the day. The yen has been under pressure since Japan's central bank surprised markets by easing monetary policy last week. The dollar jumped to a six-month high of 79.89 yen, surpassing the October peak around 79.55 scaled after Japanese authorities intervened in markets to weaken the yen. But it pared gains to stand at 79.57 yen as short-term accounts locked in recent profits on the pair after data showed Japan's January trade deficit was in line with forecasts, though at a record 1.475 trillion yen. Analysts said easing by the Bank of Japan and the Bank of England, which extended its quantitative easing programme this month, as well as a second injection of cheap funding from the ECB next week and signs the U.S. Federal would be prepared to pump more money into the system if needed, meant risk appetite was picking up on the prospect of more liquidity. "It's a global risk positive outlook as major central banks are expanding their balance sheets," said Lauren Rosborough, senior FX strategist at Societe Generale. "People are buying the high-yielders such as the Aussie and Kiwi and selling the euro, yen and dollar, those economies where central banks are leaving rates lower for longer." The biggest beneficiaries of rising risk appetite were commodity currencies. The Australian dollar jumped to a high of $1.0817, before steadying at $1.0776, up 0.6 percent on the day. The New Zealand dollar hit a 5-1/2-month high of $0.8429. Commonwealth Bank Australia strategists revised up their Australian dollar forecast, saying it would reach US$1.0700 by the end of this quarter and US1.0900 by the end of the year.