* Euro's gains capped before finance ministers' meeting
* Greece approves budget, concerns about aid remain
* U.S. fiscal worries hits appetite for risky assets
LONDON, Nov 12 (Reuters) - The euro inched up from a recent two-month low against the dollar on Monday after Greece's ruling coalition secured enough votes in parliament to approve a tough 2013 budget.
Gains in the single currency were seen limited before a meeting later in the day of euro zone finance ministers, who were not expected to release fresh bailout funds for Greece.
Athens has to redeem 5 billion euros worth of treasury bills on Nov. 16 and had been counting on cash from the aid tranche, though a senior debt agency official said on Monday a T-bill sale on Tuesday to refinance the bills should not be a problem..
The euro was flat on the day at $1.2715, off a two-month low of $1.2690 struck on Friday, on EBS trading platform. Traders cited stop loss sell orders below $1.2685 with option expiries at $1.2700 and $1.2750.
This was likely to keep the euro between $1.2690 and $1.27500.
German Finance Minister Wolfgang Schaeuble told a German newspaper on Sunday that the troika of international lenders to Athens was unlikely to deliver its full report in time for the euro zone finance ministers' meeting.
A spokeswoman for the ministry said that while Greece had made progress, many issues remained open and it was unrealistic to expect a final decision on Monday.
While the passage of the budget removed some of the near-term uncertainty surrounding Greece, the euro is likely to remain under pressure until an agreement on how to make Greek's debt more sustainable is reached.
"What we are seeing in the past month has been a gradual erosion of investor confidence in the euro zone and that is starting to lead to renewed downward pressure on the euro," said Lee Hardman, currency economist at BTMU.
"Ultimately the situation of Greece remains unsustainable and these really are measures to kick the can down the road rather than actually dealing with the situation effectively."
The single currency dropped to a two-month low against the safe-haven Swiss franc to 1.20525 francs.
"The key issue will be what comes out of the Eurogroup meeting. If the tranche is released it is positive for risk and we should see a reasonable bounce in the euro, given the pessimism that's been built into the markets about the euro area," said Raghav Subbarao, FX strategist at Barclays.
Any euro bounce, though, could be short-lived as recent economic data has shown the crisis which started in the euro zone periphery is spreading to its core economies. Data due later this week is forecast to show a slowdown in German growth in coming quarters and France slipping into recession.
U.S. FISCAL WORRIES
Concerns about the so-called U.S. fiscal cliff has seen safe-haven flows into the dollar and kept it near a two-month high against a basket of currencies.
Demand for riskier currencies has been sluggish as investors fret about the possible impact of some $600 billion in expiring tax cuts and spending reductions due to take effect in January.
Currency speculators favoured the dollar in the latest week for the first time since early September, according to data from the Commodity Futures Trading Commission.
The dollar bought 79.44 yen, flat from Friday when it fell as low as 79.07 yen, its weakest in nearly three weeks.
Markets shrugged off a 0.9 percent July-September quarter-on-quarter contraction in Japanese economic output, in line with forecasts. This was the first negative reading in three quarters but it added to fears that slowing global growth is pushing the economy into recession.
Morgan Stanley held to its medium-term view that the yen would weaken and said it expected dollar/yen to resume its uptrend.