(Reuters) - The euro fell on Monday as investors remained cautious about how effective European policymakers latest pledges of action to resolve the euro zone debt crisis would be. The euro had earlier risen to a one-month high, adding to Friday's gains on investor optimism the European Central Bank would ultimately step in and buy bonds to reduce painfully high Spanish and Italian borrowing costs. But analysts and traders said that with many uncertainties about whether the crisis was moving towards a resolution some investors were inclined to use the euro's higher levels to put on fresh bets that the euro would fall. "There hasn't been anything that has improved the situation in Europe ... we haven't had any concrete improvement in the situation in the euro zone," said Niels Christensen, currency strategist at Nordea in Copenhagen. "The move higher was more closing of short euro positions than actually putting on new long positions because people were expecting a higher euro ... I can only expect that people are still looking for the downside in euro/dollar." The euro was down 0.2 percent at $1.2360, below a peak of $1.2444 hit in Asian trade, its strongest since July 5. ECB President Mario Draghi said last week the bank would act only in cooperation with the euro zone bailout funds, and would require countries to ask for help first. Spanish Prime Minister Mariano Rajoy has signalled he may seek a full-blown aid package but is still undecided. Immediate resistance for the euro was seen at around $1.2478, the 61.8 percent retracement of its drop from a mid-June peak to a two-year low of $1.2042 struck in late July. The euro was also pulled down as European equity prices fell, reversing some of their recent gains. This helped the safe-haven dollar, which was up 0.2 percent against a basket of currencies, with the dollar index standing at 82.571. The dollar eased 0.1 percent to 78.37 yen but held above a two-month low hit last week. The euro was down 0.4 percent at 96.74 yen, having earlier risen to 97.80, its strongest since mid-July. CHANGES FOR THE WORSE? The euro has seen choppy trading since the ECB indicated last week that it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs. While some are relieved the central bank is prepared to act, many are not convinced new ECB bond-buying would trigger a sustained euro rally. "This type of move was bound to occur at some point (given the bearish market positioning against the euro) ... But I don't think it will last," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo. He said the euro may struggle to break above $1.2500. However, analysts at Morgan Stanley recommend buying the euro at 96.70 yen, with a target of 105.00 yen and a stop at 95.20, arguing that Draghi's pledge to do whatever necessary to save the euro is a positive for the currency. "The ball is now in the politicians' court, and we believe it is only a matter of time before they choose, or are forced by markets, to ask for official aid, opening the door for ECB purchases and a tightening of peripheral spreads," they said in a note to clients.

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