* Prospects for Greek aid deal limits euro losses * Lenders to meet again next Monday to seek agreement * Dollar hits 7-1/2-month high vs yen, breaks above 82 yen * Euro crosses 105 yen for first time since early May By Gertrude Chavez-Dreyfuss and Daniel Bases NEW YORK, Nov 21 (Reuters) - The euro rose to a 6-1/2-month high on the yen and rebounded versus the dollar in choppy trading on Wednesday as comments by Germany's chancellor spurred optimism that European leaders will reach an agreement on Greek funding. Europe's common currency dropped earlier after Greece's international lenders failed to reach agreement on releasing emergency aid as they haggled over how to reduce the country's debt to a sustainable level. The euro later trimmed losses after German Chancellor Angela Merkel said she saw chances of a deal at a meeting of European finance ministers on Monday. "Perhaps the most important take-away from the failed talks was that it appears to have spurred a tactical shift by Germany," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. "It seems more determined than it has been in making sure that the Athens program remains intact." The yen, meanwhile, fell across the board on weak Japanese export data and expectations of further monetary easing from the Bank of Japan. It fell to a 6-1/2 month low against the euro and a 7-1/2 month trough versus the dollar. The euro hit a peak of 105.8 7 yen, its highest since early May, in t hin p re-holiday New York tradi ng, up more than 1.10 percent on the day. Against the dollar, the euro rose 0.08 percent to $1.2826 , off a session low of $1.2733. "It seemed there was a little more of a risk-on tone to the market pushing the euro just that last 10-15 basis points higher in the New York afternoon with word of the ceasefire with Israel and Hamas," said Greg Anderson, G10 strategist at CitiFX, a division of Citigroup in New York. An Egyptian-sponsored ceasefire came into effect on Wednesday between Israel and the Islamist Hamas movement, halting an eight-day conflict around the Gaza Strip that has killed more than 140 Palestinians and five Israelis. U.S. markets are closed on Thursday due to the U.S. Thanksgiving holiday. Camilla Sutton, chief currency strategist, at Scotia Capital in Toronto expects the euro to trade in narrow ranges in the near term, closing the year around $1.27 and trending lower in 2013, possibly closing at $1.25. The single currency has also been under pressure from recent economic data showing the euro zone is in recession. Additional euro weakness stems from the uncertainty created by Spain, which has yet to request the financial aid many in markets think it needs. The country also faces a secessionist threat from a regional election in Catalonia on Sunday. YEN STUMBLES The dollar rose as high as 82.5 5 yen, its strongest level since early April as the main opposition Liberal Democratic Party, tipped to win in a parliamentary election next month, pledged to push for further easing by the BOJ. It last traded at 82. 52, up 1.05 pe rc ent. The dollar broke through reported options barrier at 82 yen, triggering stop-loss orders. It was the dollar's sixth consecutive day of gains against the yen. The yen was also hurt by data showing Japanese exports declined for a fifth month in succession, fanning concern the country may be slipping into recession. "Between a net trade and current account deficit, more money is now flowing out of Japan, which is extremely negative for the yen," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York. "In fact, it is so negative that it completely overshadowed pre-positioning for the U.S. fiscal cliff." If the dollar ends the year above 76.90 yen, this would be the first positive year for the currency pair in six years. Lien said this has been caused entirely by weak Japanese fundamentals. The Australian dollar also rose to a 7-1/2-month high of 8 5.5 4 y en.