The euro fell against the yen and dollar on Wednesday as investors took profit on gains made after euro zone policymakers agreed on a new debt target for Greece.
The yen also rose against the dollar as market players pared back expectations of aggressive monetary easing by the Bank of Japan and concerns about the U.S. fiscal cliff increased.
International lenders agreed a plan to cut Greek debt earlier this week, allowing the country to avoid a chaotic default and helping push the euro to a one-month high of $1.3010.
But a lack of detail and growing skepticism over how Athens will implement the reforms needed to reach the new targets made investors wary of pushing the single currency higher.
"(A deal on Greece)is a passing of the event risk so it is people taking profits on the move higher,» said Saeed Amen, currency strategist at Nomura.
The euro dipped 0.2 percent to $1.2921, with the 55-day moving average at $1.2918 providing support.
With the Greek deal out of the way analysts said investors were focusing on the U.S. fiscal cliff -- a combination of automatic tax hikes and spending cuts due to kick in next year that could tip the world's biggest economy into recession.
Barclays strategists said Europe's «muddle-through approach» on Greece threatened to amplify the impact on the euro of the outcome of the U.S. talks.
"If they go well, the relief on peripheral assets may have legs, including the euro. If it goes bad, even France may get questioned by an uncertain market, and we would expect the euro to suffer,» they wrote in a note.
The U.S. Congress pushed toward compromise on Tuesday on the fiscal cliff, but agreement still appeared elusive despite growing pressure from American business interests for action.
Comments by U.S. Senate Majority Leader Harry Reid about the lack of progress by Democratic and Republican lawmakers also fanned concerns, and added to demand for the dollar and yen against perceived riskier currencies.
The yen rose broadly as investors unwound long dollar and euro positions. The Japanese currency had lost about 4 percent against the dollar over the past two weeks as investors started to price in a possible shift in monetary policy after Japan's December 16 election.
Shinzo Abe, likely to emerge as premier, has called for more aggressive easing, but some investors have begun to question how much impact he will have on monetary policy.
"Worries about the U.S. fiscal cliff have increased, while the effects of the 'Abe trade' have faded for now,» said Masashi Murata, senior forex strategist at Brown Brothers Harriman.
"The market wants to see what the Bank of Japan actually does,» he said.
The dollar fell 0.4 percent to 81.80 yen, retreating from last week's 7-1/2 month high of 82.84 yen. Market players cited demand for the dollar at 81.70 yen and said this was likely to check the Japanese currency's gains.
The euro also fell against the yen, dropping 0.7 percent on the day to 105.65 yen, moving away from a seven-month high of 107.135 yen set on Monday.