* Euro recovers from 1-yr low vs dlr, Greece asks to tap aid
* Strong German, euro zone data helps euro recovery
* Market remains negative on euro, more losses seen
(Releads, updates throughout)
By Naomi Tajitsu
LONDON, April 23 (Reuters) - The euro pulled back from a one-year low against the dollar on Friday as Greece gave in to market pressure and asked to trigger an aid package from the European Union and International Monetary Fund.
Prime Minister George Papandreou said it was imperative Greece, whose debt problems have weighed on the euro all year, seek to activate the aid mechanism. [ID:nATH005401]
The euro was last at $1.3308, up 0.1 percent on the day.
It hit a one-year low of $1.3201 earlier in the session, hammered after a downgrade of Greece's sovereign rating on Thursday piled pressure on Athens to tap the aid, worth 40-45 billion euros.
Faith in Greece's ability to service its debts has gradually evaporated this week, pushing the cost of insuring against a debt default to a record high and widening spreads between Greek and German government debt yields to levels not seen for at least 12 years.
"There's a lot of fear in the market, so if indeed they reach some sort of solution it will be near-term supportive for euro sentiment," said Valentin Marinov, currency strategist at Societe Generale.
He said the euro may jump as high as $1.3415 in a knee-jerk reaction to any announcement of imminent help for Greece, but added that any corrective rally would be fleeting.
"We still don't know what the IMF would require for its participation in an aid package ... there's still some uncertainty (surrounding the issue)."
The euro also recovered from early losses against the yen and traded little changed on the day at 124.30.
Citing a risk of higher Greek debt yields, Moody's Investors Service on Thursday cut Greece's rating by one notch to A3, placing it four notches above "junk status". [ID:nLDE63L0SF]
Greece's debt problems have emphasised the weak fiscal positions of other euro zone countries, leaving some investors questioning the stability of the 16-nation currency bloc.
The single currency has fallen more than 1 percent against the dollar so far this week, hit a three-month low against sterling, and tumbled to its weakest versus the Canadian dollar since mid-2001.
Worries about Greece have stung demand for risky assets and boosted the dollar, considered a safe bet in uncertain times. Against a currency basket <.DXY>, the greenback hit a one-month high of 82.074 before pulling back to 81.620.
GREECE VS DATA
A surge in German business morale this month to its highest in nearly two years also helped the euro, as did a bigger-than- expected jump in euro zone industrial new orders in February. [ID:nBAE003774] [ID:nLDE63M0M0]
But analysts said the market would be primarily driven by fallout from the Greek crisis.
"It's not economic fundamentals but the euro zone peripheries, especially Greece, that's going to weigh on the market," said Ian Stannard, currency strategist at BNP Paribas.
Analysts said revised data on Greece's 2009 budget deficit released on Thursday indicating the shortfall was wider than first thought, suggested Greece may face an even harder time consolidating its debts. [ID:nLDE63L12B]
Forecasters in a Reuters poll, issued before Greece said it would seek to trigger the aid mechanism, saw a roughly one-in- four chance the country would default on its debt in the next five years. [ID:nLDE63J232]
The Australian dollar fell as much as 1 percent to $0.9184 <AUD=D4> after the head of the Reserve Bank of Australia said interest rates were moving close to "average". [ID:nSYA008239]
Finance ministers from the Group of 20 economic powers began talks in Washington on Thursday, where they were expected to discuss ways to reform the financial sector. [ID:nN22159790]
(Additional reporting by Tamawa Desai, editing by Nigel Stephenson)