* Relief impact of emergency aid package prove temporary
* Euro <EUR=> falls 0.7 percent to $1.2700
* Focus back on structural problems plaguing euro zone
(Adds quote, detail)
By Neal Armstrong
LONDON, May 11 (Reuters) - The euro fell on Tuesday as the relief rally unleashed by an emergency aid package to prevent the spread of a euro zone debt crisis dissipated and the focus switched back to structural problems plaguing the bloc.
European Union finance ministers, central bankers and the International Monetary Fund hammered out an emergency package of loan guarantees to euro zone members over the weekend to try to shore up sentiment in its bond markets and the euro. [ID:nSGE6490HH]
The "shock and awe" plan initially boosted sentiment, propelling the euro <EUR=> close to $1.31 on Monday and off a 14-month trough of $1.2510 hit on trading platform EBS last week when investors had feared the sovereign credit crisis could spread from Greece to other euro zone countries.
At 0930 GMT on Tuesday, the euro had slipped back to trade with losses of around 0.8 percent at $1.2675, with traders noting sales from macro accounts. Poor liquidity was said to be exacerbating moves.
"Monday was a relief rally and now it's back to reality as people are looking at the facts. Greece has to consolidate its finances and the euro is still not attractive," said Antje Praefcke, currency strategist at Commerzbank.
Investors doubt whether the Greek government will be able to carry out the austerity measures required to restructure its public finances. Other states such as Portugal and Spain also have budgetary concerns.
Moody's Investors Service said on Monday it may still downgrade Portugal and Greece's rating could fall to junk grade. [ID:nN10227186]
The euro fell 1.5 percent to 117.42 yen <EURJPY=R>, a day after jumping around 4 percent versus the Japanese currency.
Analysts said worries over the specific details of EU/IMF aid package were also weighing on the currency.
"There are question marks regarding the details of the package, such as how bond purchases would be sterlised. Negative sentiment over the currency persists and it should remain under further pressure," said Paul Mackel, director of currency strategy at HSBC.
The options market was showing a clear bias for euro downside. The one-month risk-reversal <EUR1MRR=ICAP> was trading at 3.00 for euro puts versus 2.65 on Monday, moving beyond the previous record seen at the peak of the Lehman crisis.
UK POLITICAL POSTURING
Political uncertainty put pressure on sterling as Britain's two big rival political parties planned to resume courting the Liberal Democrats after Prime Minister Gordon Brown said he would step aside to try to keep his Labour Party in power. [ID:nLDE6492UW]
Sterling was able to pare losses to trade at $1.4845 versus the dollar <GBP=D4> after UK industrial output jumped more than six times faster than expected in March. [ID:nONS006645]
The dollar was down 0.8 percent at 92.43 yen <JPY=>. Traders said the yen was helped by Japanese exporters selling other currencies.
The yen's climb picked up pace as stocks slipped into negative territory <.FTEU3>, prompting investors to reduce risks.