* Euro hovers near 3-week low vs dollar, Greece again weighs
* Commodity-linked currencies stung by India rate hike
* Dollar keeps gains but makes no progress; Japan on holiday
By Charlotte Cooper
TOKYO, March 22 (Reuters) - The euro hovered at its weakest levels in three weeks on Monday and the dollar remained firm as Europe remained divided over aid to debt-burdened Greece ahead of a summit later this week.
The dollar index held near Friday's two-week high as uncertainty over Greece and a surprise rate hike by India kept investors cautious about riskier assets, but it lacked momentum to push higher.
The euro teetered near a 17-month low on the Swiss franc touched its lowest in over a week against the yen, as Germany urged Athens to solve its debt problems alone and Italy backed European Union support.
Japanese domestic markets were closed for a national holiday, leaving yen trade thin.
The euro, which lost 1.9 percent against the dollar last week on worries about Greece, found support near Friday's low just above $1.3500 with a Fibonacci level at $1.3485 and then more support expected at the late February/early March lows at $1.3440/30.
"There's a huge envelope of confusion about Greece and that's what's pushing the euro lower," said Mitul Kotecha, global head of FX strategy at Credit Agricole CIB in Hong Kong.
The euro languished at $1.3510 0.2 percent down from late Friday levels, with resistance close in at $1.3540.
The Fibonacci level at $1.3485 is a 61.8 percent retracement of the euro's rally from March last year to its November high of $1.5145.
It has lost about 6 percent against the dollar this year on worries about fiscal conditions in Greece and other weaker eurozone members.
Data from the Commodity Futures Trading Commission showed speculators' net short positions on the euro fell to 46,341 contracts in the week ended March 16, down from 74,551 net short positions the week before. See
The single currency eased 0.3 percent to 122.22 yen and 0.2 percent to 1.4335 Swiss francs It hit its lowest since October 2008 at 1.4318 francs on Friday.
GREECE ISSUE TO KEEP WEIGHING ON EURO
European leaders meet on March 25 and 26. Greece said at the weekend it could go without borrowing until the end of April but is pressing its EU partners for a concrete standby package to help bring its borrowing costs down.
Analysts at JPMorgan suspect the Greeks want a sufficiently clear proposal from the rest of the region to encourage a significant narrowing of spreads ahead of the refinancing that needs to be done over the next couple of months.
"This brinkmanship between Greece and the rest of the region is likely to come to a head this week," they wrote in a note to clients. "If the rest of the region does not propose something that is acceptable to the Greeks at this summit, then the Greeks may well go to the IMF."
The dollar remained rangebound on the yen at 90.50 with support around 89.75 and resistance just over 91.00 yen.
Final approval of healthcare reform by the U.S. House of Representatives saw little immediate dollar reaction. But currency players continued to watch a spat between Washington and Beijing over the yuan, with China's Commerce Minister saying it would retaliate if the U.S. labelled it a currency manipulator.
Commodity-linked currencies like the Australian and New Zealand dollars were still smarting from Friday's surprise rise in interest rates from India.
Strong demand from India and China has been a major driver of rising commodity prices, so anything that threatens to cool those economies tends to hurt sentiment.
Analysts said the move also pointed up the difference between Asian and developed economies.
"It's another reminder that Asian problems with inflation are completely opposite to the G10 problems with deflation," said Robert Ryan, G10 currency strategist BNP Paribas in Singapore.
"There might be a bit of a pull back in some of the risk appetite but longer term it will reinforce the Asia strong story against the problems of the developed world."
The Australian dollar was little changed on the day at $0.9145 after dropping 0.6 percent on Friday, and the New Zealand dollar eased 0.3 percent to $0.7065.
Both also lost about 0.2 percent on the day against the yen. (Additional reporting by Wayne Cole in Sydney; Editing by Kim Coghill) ((Email: charlotte.cooper@thomsonreuters.com; +81 3 6441 1870; Reuters Messaging: charlotte.cooper.reuters.com@reuters.net))