(Reuters) - The euro inched up on Monday, supported by the prospect of European Central Bank action to tackle the debt crisis, but remained vulnerable to selling on rallies and signs of disagreement among euro zone politicians. Expectations the ECB will step in and help lower sky-high Spanish and Italian borrowing costs in the coming weeks have lifted the euro in recent days, though traders were mindful of opposition from richer northern European countries. Belgian central bank governor Luc Coene said in a newspaper interview that the ECB should ensure any help it gives to indebted countries comes with strict conditions. And German magazine Der Spiegel quoted Finnish Prime Minister Jyrki Katainen on Sunday as saying Finland remained opposed to ECB bond-buying. ECB President Mario Draghi said earlier this month that the bank may buy more government bonds after pledging to do everything necessary to preserve the euro. This boosted the euro as traders cut back on bets on the currency falling. It hit a one-month high of $1.2444 last Monday. "There is no coherent message between politicians and policymakers," said Jeremy Stretch, head of currency strategy at CIBC, adding that the euro's failure to break above $1.2450 would leave traders inclined to sell it on rallies. The risk of politicians disagreeing on ECB action was likely to see traders selling the euro, he said. Currency moves were exaggerated by lower volumes with much of the northern hemisphere on summer holidays. The euro was up 0.4 percent on the day at $1.2335, rising past reported stop-loss orders at $1.2310 and $1.2330 to hit a session high of $1.2339 on EBS. Traders cited reported offers above $1.2350 which could check the euro's gains. Chartists said a drop below Friday's low of $1.2241 could see it target the early August low of $1.21335. Despite traders paring short positions , the overall outlook for the euro remained gloomy. On Tuesday, euro zone second-quarter economic output data is expected to show a contraction and is likely to put pressure on the ECB to cut interest rates, a factor that may weigh on the euro. "This rise will not last. Every time the euro rises, we are seeing more investors sell and initiate fresh short positions. That is likely to remain the trading strategy until September," said Peter Kinsella, currency strategist at Commerzbank. He expected the euro to tread water until September 12, when the German constitutional court delivers its verdict on the euro zone rescue fund and the fiscal pact for budget discipline. JAPANESE DATA The safe-haven Japanese yen showed little reaction to weaker-than-expected economic growth in Japan in the April-June period. But analysts said the sluggish economic activity raised expectations that the Bank of Japan and the government were ready to provide additional stimulus, a move which could push the yen lower in the near term. The U.S. dollar was steady at 78.21 yen, holding above a two-month low of 77.90 yen hit in early August, while the euro rose 0.2 percent to 96.40 yen. The Japanese data highlighted the impact of the euro zone debt crisis on the global economy [ID:nL4E8JA2OE]. That weighed on riskier currencies like the higher-yielding Australian and New Zealand dollars. The Australian dollar eased 0.2 percent to $1.0550, well below a 4-1/2 month high of $1.0615 touched last week.

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