Asian shares inched down and the euro fell from its highest in more than six weeks Monday, as markets cautiously tuned in to a likely debt swap deal for Greece that is crucial to avoiding a messy default and eyed yet another European summit meeting.

Commodities from copper to oil also slipped after a rally last week that followed the Federal Reserve's pledge to keep interest rates low, while the dollar index <.DXY>, measured against major currencies, regained some ground from Friday's fall to a seven-week low.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> eased 0.3 percent after hitting its highest since late October earlier. It gained 2 percent last week for its fourth consecutive weekly increase.

A slower-than-expected annualized 2.8 percent growth in the U.S. economy in the fourth quarter, albeit the fastest quarterly rate in 1- years, weighed on world stocks on Friday. The Nikkei stock average <.N225> shed 0.6 percent, falling for a third straight session. <.T>

Chinese markets reopened with a drop, after being shut last week for the Lunar New Year holidays.

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U.S. Q4 GDP: http://link.reuters.com/jym36s

Portugal/Ireland/Italy bond: http://link.reuters.com/mac36s

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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 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.

Macroeconomic conditions are not that bad, with some signs of European growth bottoming out and U.S. data suggesting a recovery path, but markets appear to have been too optimistic and holding out too much hope, despite so much uncertainty still surrounding the Greek issue, he said.

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

The euro fell 0.2 percent to $1.3190, after climbing to $1.3235 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.

PORTUGAL SAPS OPTIMISM

Investors were seeing Portugal as the next potential default after Greece, selling off its stocks and bonds just as some stability was returning to other highly indebted countries that had been battered by the markets only recently.

Friday, Italy's six-month borrowing costs dropped below 2 percent to the lowest level since May, while Spanish 10-year government bond yields hit their lowest level since November 2010.

Italy faces a more challenging sale of longer-dated debt on Monday.

The markets brushed off Fitch Ratings' downgrade of Italy, Spain, Belgium, Slovenia and Cyprus.

Interbank lending rates in Europe fell on Friday to their lowest level since March 2011, down more than 30 basis points since the European Central Bank injected huge amounts of liquidity into the system in December.

Reflecting improved sentiment last week, investors crowded into emerging markets equity and debt funds and U.S. equity, bond and high-yield funds in the week ended January 25, data from EPFR Global showed Friday.

Gold eased after earlier rising to its highest in more than seven weeks near $1,740 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.

Ten-year U.S. Treasury yield ticked lower in Asia Monday to 1.87 percent from 1.90 percent in late U.S. trade, while Japanese government bonds tracked Friday's rise in Treasuries, with the 10-year yield dipping to 0.960 percent, near a 14-month low of 0.935 percent hit two weeks ago.

(Editing by Alex Richardson)

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