The euro pulled back from two-month highs on Monday, as investors booked profits on its rally while lingering concerns about Europe's sovereign debt problems looked likely to keep a lid on future gains.

High-yielding currencies like the Australian and New Zealand dollars were also under pressure as subdued U.S. data and falling equities .SPX led investors to shun risky trades.

Trade was light in Asia with Tokyo shut for a holiday.

The euro EUR= dipped 0.2 percent to $1.2904, pulling back from a two-month high of $1.3008 hit on Friday on trading platform EBS, with news that the International Monetary Fund and the European Union have suspended a review of Hungary's funding programme putting some pressure on the single currency.

This means Hungary will not have access to remaining funds in its $25.1 bln package.  Dealers said this reminded investors of the region's sovereign debt problems just days ahead of the results of stress tests on euro zone's banks. The results are due out of Friday.

While European leaders believe that the tests will bring confidence, the markets may not believe the sugar-coated figures with the euro primed for another leg down in the weeks ahead, said David Scutt, forex trader at Arab Bank, Australia.

Heavy selling pressure is expected to emerge ahead of resistance at $1.3100-10.

Near term support for the euro is seen around the $1.2850 area, the 50 percent retracement of the euro's fall from a high near $1.3820 on March 17 to a four-year low of $1.1876 hit in early June. Traders said there was talk of light stops around $1.2880.

The dollar edged up 0.1 percent against the yen to 86.64 yen JPY= but was not far from a seven-month low of 86.27 yen hit on Friday on EBS.

Latest data from the Commodity Futures Trading Commission showed speculators have been increasing long positions in the yen and cutting longs in the U.S. dollar. .

EYES ON YEN

Traders said with U.S. yields heading lower, the dollar could break past support near its seven-month low.

Such a drop could spark speculation of potential Japanese intervention to restrain the yen, especially if the dollar drops to a 15-year low by breaching the November 2009 trough of 84.82 on EBS.

With the yen's latest rise having brought it to levels that could cause pain to Japanese exporters, a focal point is whether Japanese authorities will take steps to curb the yen's rise, through measures such as verbal or actual intervention, or additional monetary easing measures.

We're getting into the territory where the MOF will start to get a little bit more vociferous, said Gareth Berry, a currency strategist with UBS in Singapore.

Berry said the Ministry of Finance (MOF) may start to express concern over the exchange rate, adding that such rhetoric could help limit the dollar's downside.

I think there is plenty of scope for further downside beyond 85 before we actually see an actual act of intervention, he said.

Japan has not conducted any foreign exchange intervention in more than six years, having last intervened in March 2004.

When the dollar slid to the 84.82 yen trough against the yen in late November, the BOJ stepped closer to currency intervention than at any time in the preceding five years by checking exchange rates with commercial banks.

Soon after, the BOJ called an emergency meeting in early December and decided to pump 10 trillion yen ($115.5 billion) in three-month funds into the banking system.

On Friday, a private survey showed U.S. consumer sentiment weakened in early July to an 11-month low and capped a week which saw U.S. data printing on the softer side, raising questions about the sustainability of a U.S. recovery.

A resulting slide in U.S. stocks .SPX hit growth-linked currencies like the Australian dollar, which dipped 0.2 percent to $0.8680 AUD=D4. Earlier, traders said a model fund was seen selling the Aussie, which shed 1.6 percent on Friday. (Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney; editing by Kazunori Takada)