(Reuters) - The euro fell on Tuesday, pulling further away from recent highs as uncertainty about when Spain will apply for a bailout and fresh concerns about Greece weighed on investor sentiment.
Losses were likely to be limited on steady demand for the single currency and growth-linked currencies at lower levels after China's central bank became the latest to take additional stimulus measures to support growth.
The euro fell to $1.2907, well below a two-week high of $1.3072 hit on Friday. Traders cited bids below $1.2900 and offers around $1.3000, suggesting the single currency was likely to be pinned in a familiar range.
Against the yen, it was down 0.3 percent to 101.24 yen, well below Friday's two-week high of 102.80 yen, as some Japanese investors exited their long euro/yen positions.
"While uncertainty about Spain plays out, investors are also getting worried about the Greek situation," said Adam Myers, senior currency strategist at Credit Agricole.
"The euro will reach inflexion point once Spain goes for a bailout, perhaps later in the month. But until then, it will be a bit difficult for it to break out and hit recent peaks," he added.
Euro zone finance ministers defended Spain on Monday, saying the country was taking steps to overhaul its economy, successfully funding itself in the financial markets and did not need a bailout, at least for now.
The finance ministers and the International Monetary Fund also held a "thorough and robust" debate on Greece, but failed to make significant progress in deciding how best to get the country back on track with its bailout program.
Late in September, Reuters reported Greece's international lenders were at loggerheads over how to solve Athens' debt crisis with the IMF demanding European governments write off some of the Greek debt they hold.
Greek Finance Minster Yannis Stournaras said international lenders were considering its request to give Greece two more years to reach its budget deficit reduction targets but he added they had just started discussions.
SWISS FRANC DROPS
Earlier in the day, the euro climbed to a three-week high against the Swiss franc as traders cited a media report that a U.S. custodial bank was planning to impose a penalty on Swiss and Danish crown deposits.
Both currencies have been safe-havens to investors fleeing the euro zone debt crisis. While the Swiss National Bank imposed a floor on the euro/Swiss franc pair at 1.20 francs to discourage inflows, Denmark's central bank has cut official rates.
"The Swiss franc weakened after Bloomberg reported that a custodian bank plans to impose negative interest rates on Swiss and Danish crown deposits from November 1," Gareth Berry, currency strategist at UBS Singapore wrote in a note.
"We doubt the news will have a lasting weakening effect on the Swiss franc however, given that interest rates have been negative in the interbank market for months, and those who wish to hold Swiss franc deposits for safe haven reasons are unlikely to be deterred by a 25 basis point penalty."
The euro was 0.2 percent higher at 1.2116 francs, having risen to a high of 1.21435 earlier in the day. The dollar was also 0.5 percent higher against the Swiss franc, trading at 0.9373 francs.
The dollar's index against a basket of currencies .DXY was up 0.3 percent at 79.791, well above Friday's two-week low of 79.103. Still it needed to rise convincingly above the October 1 high of 80.147 to start a fresh uptrend.
Against the yen, the dollar was little changed at 78.30 yen, but still below a two-week high of 78.88 set on Friday.
