* Euro under pressure as Greek/German bond spreads widen
* Euro slips through $1.33 before trimming losses
* Merkel sets conditions on German aid for Greece
* Fed expected to sound upbeat note on economy this week (Adds detail, quote, updates prices, adds byline)
By Nick Olivari
NEW YORK, April 26 (Reuters) - Confusion surrounding the timing and amount of emergency aid for Greece pushed investors into selling the euro on Monday as markets worried whether the euro zone country can avert a debt default.
The euro dipped briefly below $1.33, falling against the greenback for the seventh trading session in the last eight. It also hit a three-month low against sterling on investor concern about potential conditions attached to a loan for Greece.
The Federal Reserve's policy meeting this week drew renewed attention to when the U.S. central bank will likely begin raising interest rates. The dollar rose above 94 yen as investors bet the Fed would raise rates before year end, well ahead of any move by the Bank of Japan.
Confusion over aid for debt-stricken Greece arose on Monday after German Chancellor Angela Merkel said the euro zone member, which on Friday had requested emergency aid, must commit to further savings measures and show it can return to a sustainable economic path before Germany can approve aid. [ID:nBEB004453].
Greece had tried to reassure investors over the weekend that the 45 billion euros ($60.5 billion) in aid from the European Union and the International Monetary Fund would arrive in time to avert the euro zone's first sovereign default.
"Aid for Greece still doesn't seem like a completed deal, so all the uncertainty about the timing and details of a Greek plan limits demand for euro," said Michael Malpede, analyst at Easy Forex in Chicago.
Two-year Greek government debt yields rose above 12 percent and the gap between 10-year Greek and German bonds swelled to the widest since the euro was introduced.
The euro was down 0.4 percent at $1.3332 after earlier
hitting a session low of $1.3291
"Assurances on the part of EU officials did little to assuage investors who are moving to ascertain how an eventual restructuring of Greek debt might unfold and which countries and banks will suffer once the inevitable occurs," said Joseph Brusuelas, chief economist at Brusuelas Analytics in Stamford Connecticut, in a note to clients.
Sterling also rose 0.4 percent to $1.5444
The dollar rose 0.3 percent to 94.15 yen
"Greece's fiscal nightmare should not obscure the fact that economic and financial conditions have stabilized to the point where monetary policy risks are tilting towards the tighter -- or at least less accommodative -- side in virtually every major region beyond Japan," Cameron Umetsu, a senior economist at Mizuho Corporate Bank wrote in a note to clients on Monday.
The Fed is expected to sound an upbeat note about the economy when it meets this week, setting the stage for a rate increase later this year, while investors expect the Bank of Canada to raise rates as soon as June.
Australia's central bank has already lifted rates twice
this year, which has helped boost the Australian dollar. On
Monday, it hit a 19-month high against the yen at 87.77 yen
Rate hikes in the euro zone, though, look to be some way off, thanks largely to Greece's debt troubles. The euro has lost nearly 7 percent against the dollar this year.
Investors worry that other indebted euro zone countries may also face financing trouble. Yields on Portugal's two-year government bonds rose more than 100 basis points on Monday.
"It's not just about Greece but also what Greece means for the rest of Europe," said Michael Hart, currency strategist at Citigroup. "There's clearly a lack of credibility with the package. It's not clear whether this is going to solve the liquidity issue for Greece." (Additional reporting by Steven C Johnson in New York and Natsuko Waki in London; Editing by Andrea Ricci)