(Reuters) - The euro dipped against the dollar on Monday, wobbling after a short-covering rally last week and was vulnerable due to uncertainty over crucial talks on a Greek debt swap deal to avert a messy default. The euro dipped 0.1 percent on the day to $1.2925, remaining below a high around $1.2986 hit on Friday when it was helped by investors taking profit on hefty short euro positions. Private creditors said on Sunday they had come to the limits of what losses they could concede, putting the ball in the court of the European Union and the IMF. Market players are looking to a euro zone finance ministers meeting on Monday where they will decide what terms of a Greek debt restructuring they are ready to accept in order to pave the way for a second bailout package for Athens. Any positive news that emerges from these talks could boost appetite for risk, lifting the euro, but any gains were seen as limited as uncertainties are likely to remain about the outlook for Greece and other highly indebted euro zone countries. "It is uncertain what will happen with the restructuring of Greek debt, and after that there will be tough negotiations with the EU and the IMF about the next financing facility," said Niels Christensen, currency strategist at Nordea in Copenhagen. "The major risk to euro/dollar is to the downside, especially after the small bounce last week which took out some of the riskier short positions." Traders said unwinding of hefty short positions may yet give the euro a fillip in the near term, possibly pushing it through reported offers around $1.30, although gains much beyond that were seen unlikely. Data showed speculators boosted net euro shorts to a fourth straight record in the week to January 17, suggesting investors are positioned for further falls. "The euro stalled ahead of $1.30 last week and unless the Greek talks come to some constructive conclusion soon, it's hard to see it break that level in the near future," said Sumino Kamei, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ. He said the euro was poised for some choppy trading with low volumes exacerbating volatility as many Asian centers including China, Hong Kong and Singapore are closed for the Lunar New Year holidays for much of this week. Traders said a clear break below $1.2870-80 could see major support at $1.2800-10 tested. AUSSIE SHINES The euro was helped off lows, however, as the Australian dollar rose to an 11-week high versus the U.S. dollar of $1.0509, with investors favoring the high-yielding currency and the sound fundamentals of the Australian economy. This helped push the dollar index .DXY into negative territory at 80.190. "The AUD's break above 1.0450 on Friday maintains the positive momentum since the middle of December," said Besa Deda, chief economist at St. George Bank in Sydney. Against the yen, the greenback bought 77.02 yen, having retreated from last week's high of 77.31. The euro was steady against the yen at 99.61 yen, down from last week's peak around 100.33. Against the Australian dollar, it fetched A$1.2310, not far off a record low around A$1.2220 set on January 17. For the wider market, the Federal Reserve's two-day policy meeting starting on Tuesday will be the major event. Although no policy change is expected, the Fed could take the historic step of announcing an explicit target for inflation as part of its new communication strategy. (Additional reporting by Antoni Slodkowski in Tokyo and Ian Chua in Sydney; editing by Anna Willard)

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