* Euro near four-week highs vs USD
* Markets hopeful of an aid deal for Greece
* Resumption of U.S. fiscal cliff talks also eyed
By Ian Chua
SYDNEY, Nov 26 The euro started the week near one-month highs against the dollar, having staged an impressive rally on hopes that Greece will finally secure more emergency loans to keep it afloat.
Euro zone finance ministers meet on Monday for a third time in as many weeks to hammer out a deal to get international lenders to release aid to Greece before debt repayments due mid-December.
Germany Chancellor Angela Merkel said she was confident a deal could be reached, while the French finance minister said an agreement was close.
The euro bought $1.2972, not far off Friday's peak of $1.2991, a high not seen since late October. Against the downtrodden yen, the common currency was at 106.85, having scaled a seven-month high around 106.98 on Friday.
"There is optimism around in regards to the euro area's ability to achieve a deal on Greece," said Emma Lawson, senior currency strategist at the National Australia Bank, adding further upside in euro/dollar was likely.
With the euro on the front foot, the dollar index languished near a three-week trough of 80.128 plumbed on Friday.
There was little reaction so far to news that separatist parties in Spain's Catalonia looked set to win a majority in regional elections. Growing separatism is a huge challenge for Spanish Prime Minister Mariano Rajoy, who is trying to bring down painfully high borrowing costs by persuading investors of Spain's fiscal and political stability.
Investors continued to make short shrift of the yen on expectations of bolder stimulus to spur Japan's economy. The country's opposition party, tipped to win next month's election, has called for radical monetary stimulus to beat deflation.
The dollar bought 82.35 yen, near an eight-month high around 82.84 set last week.
Dealers warned much of last week's action occurred in thin trading conditions due to holidays in the United States and Japan and could easily be unwound.
Still, analysts at BNP Paribas believed the market's 'risk-on' mode could continue if a Greek aid deal was indeed finalised and the United States made progress on its own fiscal problem.
"Although a swift deal is probably too optimistic, we believe an eventual compromise will be achieved well before the end of the year," they said of the U.S. 'fiscal-cliff' talks, adding they expected the Federal Reserve to expand its quantitative easing programme at its December meeting as well.
"(This) combination of positive developments should, in our view, maintain this risk momentum over the coming weeks."
Commodity currencies, usually bought in times of strong risk appetite, made the most of the upbeat market sentiment.
The Australian dollar rallied more than 1 percent last week and was last at $1.0460, not far off this month's high of $1.0480. A break there could see it aim for the September peak of $1.0625.
There is not much in terms of major economic news out of Asia on Monday, leaving the focus squarely on euro area talks to save Greece.
The White House and Congress are also set to resume negotiations this week to avoid a series of automatic tax hikes and spending cuts worth $600 billion set for January, which analysts fear could tip the world's biggest economy into recession.
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