* Euro suffers setback on worries about Greece
* Drop stalls near $1.13, euro later inches up from the low
* ECB no longer accepting Greek bonds for liquidity operations (Updates prices, adds comments)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Feb 5 (Reuters) - The euro steadied slightly on Thursday, after sliding the previous day when the European Central Bank said it will no longer accept Greek bonds as collateral for its liquidity operations.
The ECB’s announcement dealt a blow to Athens, which is seeking debt relief from euro zone lenders, knocking the euro to $1.1304 earlier on Thursday.
The euro later clawed back some ground to trade near $1.1353 , up 0.1 percent from late U.S. trade on Wednesday. The common currency still remains well below a high of $1.1534 set on Tuesday during a short-covering rally.
The ECB surprised markets late on Wednesday by announcing it would reimpose minimum credit rating requirements for Greek bonds, effectively shifting the burden on to the Greek central bank to finance its lenders.
The decision came after Greece’s new finance minister Yanis Varoufakis emerged from a meeting with ECB President Mario Draghi to claim that the ECB would do “whatever it takes” to support member states such as Greece.
“This is a precautionary move by the ECB, but it is important,” said CitiFX strategist Richard Cochinos.
Cochinos said the shift in the ECB’s program will be seen by markets as indicating that the meeting between Varoufakis and Draghi did not go well.
Against the yen, the euro last traded at 133.18 yen , up 0.1 percent on the day but well below a near two-week high of 135.35 yen that had been set on Wednesday.
Some market participants said they viewed worries about Greece as a short-term trading factor rather than a trigger for protracted euro weakness, citing hopes for an eventual compromise between Greece and international lenders.
“I think the market consensus is that Greece will back down in the end,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The euro will probably trade roughly between $1.12 to $1.15 until around March, Murata said.
The dollar held steady at 117.29 yen, remaining well within a 116.00-119.00 range seen in the past few weeks.
The Australian dollar rose 0.3 percent to $0.7773, edging away from a six-year trough of $0.7627 set earlier in the week. (Editing by Richard Pullin & Shri Navaratnam)