* Euro gains on short-covering, stop loss buying
* Greece unveils debt buy-back details
* Merkel does not rule out Greek debt haircut
* Dollar index at one-month low
By Nia Williams
LONDON, Dec 3 (Reuters) - The euro hit a six-week high against the dollar on Monday and analysts said it could rise further as investors trimmed bets against the single currency on signs Greece was making progress in making its debt sustainable.
Greece unveiled better than expected terms on Monday for a planned buy-back of its debt, a day after German Chancellor Angela Merkel said Greece's creditors may look at writing down more of its debt.
Greek bond prices rallied after details of the buy-back were announced, also lifting Italian and Spanish bond prices and shoring up sentiment towards the euro.
The euro climbed to $1.3049, its highest since Oct. 23, before paring gains. It last traded up 0.4 percent on the day at $1.3035. The euro also hit a three-week high of $1.20660 Swiss francs.
Traders said stop loss orders were triggered on the euro's rise above $1.3030, and market players who had bet against the single currency squared their short positions as it firmed.
There was talk of an options barrier at $1.3050 with some sovereign investors looking to sell above $1.3060.
"Merkel is sounding a bit more flexible and we are getting positioning moves and a bit of flow moves," said Daragh Maher, FX strategist at HSBC. "A number of people have been trying to sell this rally and perhaps getting caught the wrong way, and that's why we are able to push higher."
A slightly better-than-expected Spanish manufacturing PMI survey -- on top of signs of quicker Chinese growth -- also strengthened investor appetite to take on risk.
Earlier, the final reading for the HSBC China Purchasing Managers' Survey rose to 50.5 in November from 49.5 in October, as the pace of manufacturing activity quickened for the first time in 13 months.
Traders said short-covering in the euro was particularly strong against the Australian dollar, which was hit by below forecast retail sales data and expectations the Reserve Bank of Australia will cut interest rates on Tuesday.
The euro rose more than 0.7 percent to hit a one-month high around A$1.2530. The Aussie weakened 0.15 percent to $1.0420, falling as low as $1.0393 at one point.
The euro's gains saw the dollar index drop to its lowest in a month. The index fell to 79.918, down 0.3 percent on the day, and chartists said if it closed below its 55-day moving average of 80.086, it could weaken further.
Investors had gone long the U.S. dollar and many cut those positions and took profits. Analysts and fund managers said that despite the dollar's recent weakness, worries about the U.S. "fiscal cliff" were likely to support the currency.
The combination of U.S. government spending cuts and tax rises is due to be implemented in early 2013 and may cut the federal budget deficit but tip the economy back into recession.
Signs policymakers are struggling to reach an agreement to avert that scenario could boost demand for the highly liquid dollar, which is traditionally seen as safe in times of stress.
"I want to be long dollar, but this position will be shaken around a bit given the uncertainty whether a deal will be struck or not," said Howard Jones, adviser at RMG Wealth Management.
"If they are able to strike a deal, given the U.S. economy looks in much better shape than Japan and the euro zone, the dollar should be bought at dips. A euro rally above $1.32-1.34 is a sell and a drop in the dollar below 81 yen is a buy."
The dollar fell 0.3 percent to 82.15 yen, retreating from last month's peak of 82.84 yen. Investors pared some of the large short yen positions built on expectations the Bank of Japan will ease monetary policy.
That view has gained ground on expectations that a general election later this month will bring to power the opposition Liberal Democratic Party, whose leader advocates more aggressive monetary easing to dig the economy out of deflation.