The euro and shares pulled back on Friday as investors remained concerned about Greece's commitment to debt restructuring, even after it struck a long-awaited deal on fiscal reforms to secure crucial funding.
Greek political leaders clinched a deal on austerity measures and reforms needed for a second international bailout in two years, and a debt swap deal between Greece and its private bond holders was practically finalised.
But Eurogroup chairman Jean-Claude Juncker set three conditions, saying the Greek parliament must ratify the package, a further 325 million euros of spending cuts needs to be found, and political assurances must be given that the plan will be implemented.
The agreement, after weeks of wrangling over the terms of the 130 billion euro (109 billion pounds) bailout, at least removed the imminent risk of a hard default by Greece, which faces a major bond redemption on March 20.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> slid 1.4 percent, moving further away from a six-month high hit the day before, which lifted the index up nearly 14 percent this year.
European shares are likely to inch lower, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC-40 <.FCHI> to open down about 0.1-0.2 percent.
The euro was off a two-month high of $1.3322 reached on Thursday, trading down 0.2 percent at $1.3258.
I don't think anyone thinks it's going to be a nice once-off, tidy solution to the challenge. It's going to turn out to be the never-ending story and I think that's kind of the way investors are looking at this now, said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.
It's getting harder and harder to agree terms with Greece unless there is a real signpost along the way to ensure that Greece is living up to that sort of commitment, he said.
In Asia, China's trade shrank in January from a year earlier, with factory shutdowns for Lunar New Year holidays exacerbating a slowdown in external demand that has turned Beijing to take steps to support the domestic sector.
Analysts cautioned that the data had been heavily skewed by the week-long holiday which fell in January this year and in February last year.
Japan's Nikkei <.N225> fell 0.5 percent after opening marginally higher <.T>. Hong Kong shares <.HSI> fell 0.9 percent, facing tough resistance at 21,000.
Industrial commodities, such as oil and copper, retreated from Thursday's rally made on the news of a Greek deal, while gold steadied, as a firmer dollar was offset by support from accommodative monetary conditions worldwide.
U.S. crude oil fell 0.4 percent to $99.44 a barrel, after gaining $1.13 on Thursday. Brent crude also shed 0.4 percent from Thursday's settlement at $118.59 a barrel, the highest close since July 22.
Technically, Brent is over-stretched, and the current level is starting to have a significant negative effect on global economic growth, said James Zhang at Standard Bank in a note. Therefore, caution will be required when the current apparent wave of investment influx ends, as early as next week, he said.
London copper dropped nearly 1 percent to $8,676 a tonne, retreating from levels not seen in nearly five months reached on Thursday.
CONTAGION RISK RECEDING
Rabobank's Foster said the contagion threat from Greece's woes had receded significantly after the European Central Bank's enormous liquidity injection in December worked as a policy response to market jitters over the euro zone debt crisis.
Traders said the Greek news provided incentives to consolidate from a recent rally triggered by positive economic data from the United States and clear signs the ECB's funding move had helped stabilise market sentiment.
There is a bit of a sense of achievement over the Greece issue and given that the market has been risk-positive, it may be time for some correction to set in, said Hiroshi Maeba, managing director of foreign exchange trading at Nomura Securities in Tokyo.
The euro had likely seen its top for now, but because the market remained short of the single currency, its downside was also limited, Maeba said.
Barclays Capital said in a note that a subdued reaction in the forex market suggested much of the good news was already priced in, leaving the euro capped.
The political brinksmanship up till the last minute-agreement once again revealed the degree of challenges the Greek government will face in its implementation, it said.
The ECB kept interest rates at a record low 1.0 percent on Thursday as widely expected. ECB President Mario Draghi was non-committal on whether the bank would participate in Greece's debt restructuring, although he indicated that the bank could pass profits from its Greek bond holdings to euro zone countries.
Asian credit markets also turned cautious on Friday, with the spreads on the iTraxx Asia ex-Japan investment grade index widening a tad from Thursday. ($1 = 0.7517 euros)
(Editing by Richard Pullin)