The euro rose against the dollar and yen in Tokyo trade on Monday afternoon on news of a victory for pro-bailout parties in Greece's closely-watched general election.
The euro briefly hit 1.2747 in early trade, up from $1.2644 late Friday, as markets breathed a sigh of relief over the polls, which erased fears Greece may renege on terms of a bailout deal and ultimately exit the eurozone.
But the rally lost steam in the afternoon and the unit sat at $1.2707 in the afternoon amid caution over whether the polls were enough to ensure a positive long-term outlook for the unit, said a senior dealer at a major bank in Tokyo.
In Tokyo afternoon trade, the single currency was up at 100.46 yen, from 99.47 yen in New York.
The dollar, rose to 79.10 yen from 78.67 yen.
"It is highly possible that a sense of relief will prevail in markets over a short term. Over a long-term, however, the euro's weak tone will likely continue," Credit Suisse analyst Hiromichi Shirakawa said in a research note.
The 17-nation eurozone still faced pressures over the weak state of its finances, which would delay any real economic recovery, Shirakawa added.
Tensions had been mounting up to the Greek vote with the single currency hitting multi-month lows in recent weeks.
But Greece's two main pro-bailout parties clinched enough votes to form a government, as world powers pushed for a new cabinet to be formed as soon as possible.
While a victory by the leading New Democracy conservative party eased fears about a Greek exit from the euro, "there are still a lot of unknowns out there," said Auckland-based HiFX Senior Trader Stuart Ive.
"At the end of the day, the Greeks are going to need more money and they are going to want longer to pay it and Germany (the eurozone's biggest economy) is not an open cheque book," Ive said.
As markets await more news from Greece, the focus will shift to meeting of the Group of 20 industrial and developing nations in Mexico and a US Federal Reserve policy meeting later in the week, dealers said.
The dollar was lower against other Asia-Pacific currencies as traders became a little more confident in riskier assets.
It dipped to 1,158.75 South Korean won from 1,163.83 won on Friday, to Sg$1.2681 from Sg$1.2760, to 31.44 Thai baht from 31.52 baht and to 42.14 Philippine pesos from 42.31 pesos.
The greenback also declined to Tw$29.85 from Tw$29.89, to 55.37 Indian rupees from 55.67 rupees and to 9,432.00 Indonesian rupiah from 9,467.00 rupiah.
The Australian dollar bought US$1.0111 against US$1.0026, while the Chinese yuan was at 12.45 yen, from 12.40 yen.