* Euro's gains capped before finance ministers' meeting
* Greece approves budget, concerns about aid remain
* U.S. fiscal worries hits appetite for risky assets
By Anooja Debnath
LONDON, Nov 12 (Reuters) - The euro held steady just above a recent two-month low on Monday after Greece's ruling coalition secured enough votes in parliament to approve a tough 2013 budget.
Gains in the single currency were limited before a meeting of euro zone finance ministers on Monday, which was not expected to agree the release of fresh bailout funds.
Pressure to strike a deal on Greece is growing as Athens has to redeem 5 billion euros worth of treasury bills on Nov. 16 and had been counting on cash from the next aid tranche.
The euro was flat on the day at $1.2710, close to the two-month low of $1.2690 reached on Friday, on the EBS trading platform. Traders cited stop loss sell orders below $1.2680 with investors looking to sell the euro above $1.2720.
This was likely to see the euro trade in a range.
German Finance Minister Wolfgang Schaeuble told a German newspaper on Sunday that the troika of international lenders to Athens was unlikely to deliver its full report in time for the euro zone finance ministers' meeting.
"The key issue will be what comes out of the Eurogroup meeting. If the tranche is released it is positive for risk and we should see a reasonable bounce in the euro, given the pessimism that's been built into the markets about the euro area," said Raghav Subbarao, FX strategist at Barclays.
While the passage of the budget removed some of the near-term uncertainty surrounding Greece, the euro is likely to remain under pressure until an agreement on how to make Greek's debt more sustainable is reached.
Richard Hastings, macro strategist at Global Hunter Securities, said that while the euro could come under pressure as investors hedged some of the risks associated with the Nov. 16 Greece funding deadline, he expected a deal.
"We should emphasise that when it comes to distressed finance, deadlines are not as hard as they seem, and deals are surprisingly spontaneous at any moment," he added.
Any euro bounce, though, could be short-lived as recent economic data has shown the crisis which started in the euro zone periphery is spreading to its core, with German growth likely to slow in coming quarters and France likely to slip into recession.
Concerns about the so-called U.S. fiscal cliff has seen safe-haven flows into the dollar and kept it near a two-month high against a basket of currencies.
Demand for riskier currencies has been sluggish as investors fret about the possible impact of some $600 billion in expiring tax cuts and spending reductions due to take effect in January.
Currency speculators favoured the U.S. dollar in the latest week for the first time since early September, according to data from the Commodity Futures Trading Commission released on Friday.
The dollar bought 79.44 yen, flat from Friday when it fell as low as 79.07 yen, its weakest in nearly three weeks.
Markets shrugged off a 0.9 percent July-September quarter-on-quarter contraction in Japanese economic output, in line with forecasts. This was the first negative reading in three quarters but it added to fears that slowing global growth is pushing the economy into recession.
Morgan Stanley held to its medium-term view that the yen would weaken and said it expected dollar/yen to resume its uptrend.