* Euro drifts sideways, but investors remain bearish
* Greek bond moves may set tone for euro
* Kiwi falls on profit taking after RBNZ decision
* Aussie firm on growing speculation of rate hike next week
By Satomi Noguchi
TOKYO, April 29 (Reuters) - The euro steadied on Thursday, after rebounding from a one-year low the previous day, while the New Zealand dollar fell after the central bank said the upcoming tightening cycle was likely to be more modest than previous ones.
Activity was subdued in Asia, with Tokyo markets shut for a national holiday and as traders looked to Greek bond moves for euro's near-term direction.
"The mood surrounding the euro remains sour," said Satoshi Okagawa, head of forex and money trading group at Sumitomo Mitsui Bank in Singapore.
"Buying up th euro is certainly not a good idea. But selling it now looks a bit tough too after some short positions were caught."
The euro was littled changed around $1.3210. It hit a one-year low at $1.3114 on electronic trading platform EBS on Wednesday but bounced back after the Federal Reserve's policy statement boosted appetite for risk.
At the conclusion of its two-day rate setting committee meeting, the Fed maintained the "extended period" language and slightly upgraded some of their economic forecasts.
Still, the market is heavily short on the euro on Greece's budget woes and worries over sovereign risk in Europe.
Those worries intensified after Standard & Poor's downgraded Spain's credit rating by one notch to AA, following downgrades of Greek and Portugal's debt a day before that had sparked sell-off in stocks in worldwide.
For story on Spain's rating, click on.
On Wednesday, expectations that an aid deal for Greece would grow triggered a rally in euro zone peripheral government debt, tempering the effect of heavy selling in thin liquidity that had seen two-year Greek yields soar to 38 percent.
Aid package for Greece will be worth 100 billion euros to 120 billion euros ($132.6 billion-$158.8 billion) over three years, according to IMF Managing Director Dominique Strauss-Kahn, said a member of German parliament for the opposition Greens..
Strauss-Khan later said details of the plan would not be available until talks in Athens are concluded.
Traders said the euro would come under pressure if Greek yields push higher again.
KIWI FALLS
For now, support for the euro is seen around $1.31, the 76.4 percent of its move up from a low of around $1.2440 in March 2009 to a high of $1.5140 in November last year.
The dollar was slightly weaker against the yen at 93.95 yen, dragged down by the euro's fall against the Japanese currency. The euro dipped 0.2 percent to 124.10 yen.
The dollar gained more than 1 percent versus the yen on Wednesday, boosted by a rise in risk appetite and higher U.S. Treasury yields.
The New Zealand dollar fell to $0.7169, down 0.2 percent and moving further away from a three-month highs of $0.7257 hit earlier this week after the central bank announced a slightly less hawkish statement than some had expected.
The Reserve Bank of New Zealand (RBNZ) said it would remove some of the emergency monetary stimulus in the "coming months", but also said the scale of any tightening was likely to be less than in the past.
"The RBNZ is hinting at the start of a tightening cycle but a more modest and tempered one than in the past," said Su-lin Ong, senior economist at RBC Capital. "It was a balanced statement with cautious undertones."
The Australian dollar held ground around $0.9240, having jumped over 1 percent in the previous session, on speculation the Reserve Bank of Australia (RBA) will raise interest rates at its May policy meeting next week.
(Additional reporting by Anirban Nag in Sydney; Editing by Kazunori Takada)