FOREX-Euro loses ground after Greek debt talk failure

* Euro weakens; implied volatility jumps to 3-1/2 yr high

* Peripheral bond yields rise, German Bunds advance

* U.S. data weaker than expected limits greenback's advance

* FOMC meeting another event risk (Updates with U.S. data, fresh quote, prices, changes dateline, previous LONDON)

By Daniel Bases

NEW YORK, June 15 (Reuters) - The euro weakened on Monday, undermined by failed efforts over the weekend to break a deadlock in debt negotiations between Greece and its creditors that puts a bigger onus on an upcoming meeting of euro zone finance ministers later this week.

Sunday's talks between Greece and its international creditors broke up after less than an hour, suggesting still significant differences between the two sides.

Cautious trade kept the euro's losses in a narrow range, given a U.S. monetary policy meeting that ends on Wednesday. The market is looking for a clear signal on the timing of its first interest rate hike in nearly a decade.

On Monday, regional manufacturing data from New York State came in weaker than expected as was May U.S. industrial output. This helped put a floor under the euro.

"The euro would probably be lower if it were not for the U.S. numbers in terms of Empire State and industrial production reports. Draghi, so far has not said that much to move the market," said Vassili Serebriakov, currency strategist at BNP (Paris: FR0000131104 - news) Paribas in New York.

European Central Bank President Mario Draghi, speaking before the European Parliament, said the economy was recovering at a moderate pace and that a strong and credible agreement with Greece is in the interests of the euro area as a whole but the ball is in Greece's court.

The euro fell 0.10 percent at $1.12535 on the EBS trading platform, up from the session low of $1.11890. Against the yen, the euro slipped 0.10 percent, trading at 138.91 yen .

At one point the euro fell to 1.0422 Swiss francs, its lowest since June 3, before recovering to trade at 1.0530, a gain of 0.62 percent.

Concerns that Greece could default and leave the euro zone prompted the first significant bid for safety in German Bunds in six weeks and lifted peripheral euro zone bond yield premiums to their highest in nearly seven months.

Reuters data showed that one-month euro/dollar implied volatility, a gauge of how sharp swings in the currency are likely to be, rose to a 3-1/2 year high of 14.305 percent. Risk reversals - which measure demand for options on a currency rising or falling - were showing an increasing bias for euro weakness.

"The negotiations between Greece and creditors appear to be in a mess and are a key driver for the euro," said Petr Krpata, FX strategist at ING. (Additional reporting by Shinichi Saoshiro in Tokyo, Anirban Nag in London; Editing by Andrew Heavens, Susan Fenton and Nick Zieminski)