(Updates with euro's climb on Greek events, adds comments)
* U.S. GDP data hint at speed bumps ahead
* Greek debt talks could yield breakthrough
* USD/JPY drops on month-end exporter selling
NEW YORK (Frankfurt: A0DKRK - news) , Jan 27 (Reuters) - The euro rose against the dollar on Friday on hopes for a breakthrough in Greece's attempts to avoid a messy default, although data indicating a bumpy road ahead for the U.S. economy kept trading choppy.
European officials voiced optimism on Friday that Greece could reach a debt with creditors to avoid a disorderly default. Greek Finance Minister Evangelos Venizelos told reporters that his country is just "one step away" from completing a debt-swap deal with its private creditors.
But the European Union and International Monetary Fund want Greece to push through more budget cuts and implement austerity reforms before they agree on a new bailout, a report obtained by Reuters shows. and
"The euro is reacting to the Greek events," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank. "We came in, in the morning (in New York) and they were sort of expecting a deal, and they're back and forth."
U.S. data on gross domestic product added to the uncertainty. Though the economy grew at its fastest pace in 1-1/2 years in the fourth quarter of 2011, a strong rebuilding of inventories by businesses and a slower pace of spending on capital goods hinted at softer growth early this year.
"The devil is in the details," said Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey. "Overall the details show far more weakness than the headline numbers."
Should a Greek deal come through, "I think the euro can perform a bit in the short end," Eliasson said. But once the immediate crisis passes, he added, "You're going to be faced with very, very low growth" in the region, pressuring the currency lower in the medium term.
He noted that corporate buying in the United States and Europe (Chicago Options: ^REURUSD - news) near month-end helped support volume.
The euro climbed to $1.3192, up 0.68 percent against the dollar for the day so far, at midday in New York, following a morning of choppy trading in which it flitted in and out of negative territory after the U.S. economic data.
Those gains put the euro on track for its best week since October.
Against the Swiss franc, the greenback also seesawed after the GDP data. At midday in New York trading, the U.S. dollar was off 0.61 percent at 0.9146 francs.
Against the yen, the euro underperformed, down 0.35 percent at 101.10 yen as the Japanese currency recovered broadly from lows struck this week.
The dollar fell nearly 1 percent to 76.67 yen , leaving the yen on track for its biggest daily gain since late August .
The yen's strength was based on "normal ... end-of-month buying of the yen by Japanese exporters," according to a letter published by veteran trader Dennis Gartman.
"They are usually 'in' at the month's end for this purpose, and they were a bit more aggressive than usual, given the yen's recent weakness," he added.
The dollar hit a two-month high of 78.28 yen on Wednesday, according to Reuters data, but the rally stalled right below resistance at its 200-day moving average. It reversed further after the U.S. Federal Reserve pledged to keep rates low for a prolonged period.
With interest-rate differentials moving in favor of the yen, the dollar was likely to stay subdued against the Japanese currency, said Ankita Dudani, G10 currency strategist at RBS (LSE: RBS.L - news) .
The greenback has struggled since the U.S. Fed's dovish statement on Wednesday.
However, analysts said the euro zone's lingering debt crisis could keep investors wary of the single currency.
Chris Turner, chief FX strategist at ING, said investors were underestimating the risks of a domino effect from Greece.
"Portugal could be a catalyst for a weaker euro in February," he said. "The troika will be reviewing Portugal's adherence to its bailout package, while bond investors are already pricing a restructuring of Portuguese debt."
Still, the Fed's decision encouraged the use of the dollar in carry trades and sparked big gains for commodities like gold, while the commodity-linked Australian and New Zealand dollars hovered near three-month highs. (Additional reporting by Anirban Nag in London; Editing by Jan Paschal)
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