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FOREX-Euro shaky as anxious investors await Greek talks

* Euro falls on Greek worries

* Market looks to euro zone meeting

* Upbeat US jobless data revives early rate hike views

By Jemima Kelly

LONDON, Feb 20 (Reuters) – The euro fell against the dollar for a third consecutive day on Friday, as traders remained cautious before a meeting on Greece’s request for a six-month loan extension.

The euro traded 0.4 percent lower against the dollar at $ 1.1318, some way off Thursday’s high of $ 1.1450. It has largely stuck to a $ 1.1300-1.1450 range this week, as all eyes remain on talks between Greece and the euro zone.

Greece’s EU/IMF bailout programme expires on Feb. 28, and Greek Prime Minister Alexis Tsipras, who won power promising to ditch the bailout, needs to secure a financial lifeline to keep the country solvent beyond late March.

On Thursday, Germany rejected a Greek proposal for a six-month extension to its euro zone loan agreement, before euro zone finance ministers meet on Friday.

Investors are waiting for the outcome of the meeting at 1400 GMT. So far, guarded optimism has prevailed in the market, chiefly on the grounds that failure to strike a deal would be too costly for both sides. It could lead to Greece’s defaulting on its debt default and exiting the euro.

“The reason that the euro is not lower is that a lot of people still have this sanguine view that there will be an agreement because they have to reach one,” said Adam Myers, European head of FX strategy at Credit Agricole. “… At the moment the market reaction is too sanguine.”

The euro could be set for a significant fall — of 2 or 3 cents — at the beginning of next week if no resolution has been found by the end of the weekend, Myers said.

Better-than expected business data from the euro zone had little effect on the single currency as investors focused on the risks from Greece.

The dollar added to gains made on Thursday’s upbeat U.S. jobless claims data, rising 0.1 percent against a basket of currencies as investors’ bets swung back in favour of an earlier interest rate hike by the U.S. Federal Reserve..

“Although the dollar slipped on dovish Fed minutes, the market is coming to think that the minutes are a bit stale because they don’t reflect the strong (January) payrolls data,” said Osao Iizuka, chief currency dealer at Sumitomo Mitsui Trust Bank.

(Additional reporting by Hideyuki Sano; Editing by Larry King)

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