* EU/IMF agrees on new debt target for Greece
* Euro rises to one-month high before easing slightly
* Yen trims recent losses vs dollar
By Cecile Lefort and Masayuki Kitano
SYDNEY/SINGAPORE, Nov 27 (Reuters) - The euro hit a one-month high versus the dollar on Tuesday after international lenders agreed on a new debt target for Greece, in a step towards releasing a much-needed aid package for Athens.
The euro rose to as high as $1.3010, its highest level since late October, before easing to $1.2981, down 0.1 percent from late U.S. trade on Monday.
“It was not a huge reaction because (the deal) was already priced in,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
He said the euro should start losing momentum and ease around a cent by the end of the week.
“Economic data in Europe is getting worse and you also have the unresolved U.S. fiscal cliff in the background,” he added.
Euro zone finance ministers and the International Monetary Fund agreed on a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020.
Eurogroup Chairman Jean-Claude Juncker said ministers would formally approve the release of a major aid instalment needed to recapitalise Greece’s teetering banks and enable the government to pay wages, pensions and suppliers on Dec. 13.
The euro had already pushed higher against the dollar over the past week, supported by hopes for a deal on Greece and also as investor risk appetite improved due to optimism that U.S. lawmakers will reach an agreement to avoid the “fiscal cliff” of tax increases and spending cuts due to take effect next year.
Republicans and Democrats were still at odds, however, as Congress returned from its Thanksgiving holiday break.
The euro held steady at 106.44 yen, staying below the previous day’s seven-month high of 107.135 yen.
The yen gained a bit of respite in the wake of its slide over the past couple of weeks. The dollar eased 0.1 percent to 82.00 yen, staying below a 7-1/2-month high of 82.84 yen set last Thursday.
The Japanese currency has come under pressure over the past couple of weeks on mounting speculation that a new government after next month’s general elections will force the Bank of Japan to ease monetary policy aggressively.
“In the short-term, until elections, I think dollar/yen should stay a bit firm,” said Roy Teo, FX strategist for ABN AMRO Bank in Singapore, adding that the dollar might test the year-to-date high of 84.187 yen set in mid-March.
Still, the dollar’s rally against the yen may not prove very durable since there has not been any major widening in U.S.-Japan interest rate differentials, Teo said.
“We may see dollar/yen head towards this year’s high...But I don’t see it as a sustainable move,” he added.
The yield advantage of two-year U.S. Treasuries over two-year Japanese government bonds is now very minor, at about 17 basis points, and has eased from about 21 basis points in early November.
That suggests that Japanese investors have limited incentives to invest in Treasuries while taking on foreign exchange risk.