Asian stocks and the euro slipped on Monday as investors took profits from a recent share rally and adopted a cautious stance to await the outcome of talks on a Greek debt swap deal that is key to avoiding a messy default and yet another European summit.

Commodities from copper to oil also lost steam from last week, when the Federal Reserve's pledge to keep interest rates low boosted riskier assets, while the dollar index, regained ground from Friday's fall to a seven-week low.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent from its highest since October 31 hit earlier, after rising 2 percent last week for its fourth consecutive weekly gain. The Nikkei average dipped 0.6 percent.

Shanghai shares reopened with a loss, after an expected cut in the amount of cash banks are required to hold in reserve failed to materialise over the week-long Lunar New Year holiday, dragging bank shares lower.

Asian equities have risen most of this month, as concerns over European funding eased considerably with the European Central Bank's injection of massive liquidity into the system, driving down euro zone bond yields and calming interbank lending markets.

Financial spreadbetters expected Britain's FTSE 100,

Germany's DAX and France's CAC-40 to open down around 0.2-0.5 percent.


U.S. Q4 GDP:

Portugal/Ireland/Italy bond:


Greece appeared to be close to clinching a bond swap agreement with private creditors and Prime Minister Lucas Papademos sought backing from leading Greek party leaders for painful reforms.

The debt swap agreement would not be reached in time for the European Union summit meeting later on Monday, where EU leaders are expected to sign off on a permanent rescue fund for the euro zone and agree on inserting a balanced budget rule into national legislation.

As focus shifts to the second Greek bailout fund from the debt swap deal, it's likely that sentiment will revert to risk aversion, given that talks are expected to face hurdles before reaching an agreement, said Masafumi Yamamoto, chief currency strategist at Barclays Bank in Tokyo.

A successful second Greek bailout scheme could ease tensions over Portugal, while difficult talks risk reigniting fund raising concerns over Italy and Spain, Yamamoto said.

The euro fell 0.3 percent to $1.3180, after climbing to $1.3235 on Friday to its highest since mid-December. Latest data showed currency speculators raised their net euro short positions -- bets on the currency falling -- to a fifth straight record high in the week ended January 24.

Although sentiment is still positive, investors are adjusting their pace and waiting on Europe to set the outlook, said Lee Young-gon, an analyst at Hana Daetoo Securities.


Investors were seeing Portugal as the next potential default after Greece, selling off its stocks and bonds just as yields began to fall in other highly-indebted euro zone countries that had been battered by the markets only recently.

Italy faces a more challenging sale of longer-dated debt on Monday. At Friday's auction, six-month borrowing costs for Italy dropped below 2 percent to their lowest since May, while Spanish 10-year debt yields hit their lowest since November 2010.

European interbank lending rates also declined

on Friday to a 10-month low, down more than 30 basis points since the ECB's drastic funding operation in December.

With risk appetite improving, investors bought emerging markets equity and debt funds and U.S. equity, bond and high-yield funds in the week to January 25, EPFR Global said on Friday.

After slower-than-expected U.S. growth in the fourth quarter, data due later on Monday including personal income and spending will offer more insight into the strength of recovery in the world's largest economy.

Gold eased after earlier rising to its highest in more than seven weeks near $1,740 an ounce and rallying nearly 5 percent last week.

Copper also recoiled from a four-month high and a 3.7 percent gain last week, while Brent slipped after rising nearly 2 percent last week, although supply concerns from Iran and South Sudan provided support.

U.S. Treasury yields ticked lower in Asia while the 10-year Japanese government bond yield also dipped closer to a 14-month low of 0.935 percent hit two weeks ago.

(Additional reporting by Joonhee Yu in Seoul; Editing by Alex Richardson)