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Expectations for a moderate slowdown in Asia that will bring inflation rates down has been attracting capital inflows and increasing bets on a second-half recovery in stocks. Some markets though, particularly Japan, may be ripe for some profit taking after recent gains.

Risky assets have been slapped around in the first half of the year by concerns ranging from worries about escalating inflation in Asia, Japan's nuclear scare to surging commodity prices and the impact of the end of U.S. quantitative easing.

On Tuesday though, stock markets in Australia and Japan were largely flat. Investors were on watch for an Australian central bank rate decision where it is almost certain to hold rates at 4.75 percent, but an accompanying statement might offer hints that it may be backing away from a tightening bias.

The MSCI index of Asia-Pacific shares outside Japan was broadly flat, holding near the highest since June 2. The index has been in a rising trend for the past two weeks.

British and European shares ended higher on Monday even as Wall Street remained shut for a holiday.

In currency markets, the Australian dollar was under some pressure early in the session after local media in China speculated on a possible interest rate increase in China. It was down 0.3 percent to US$1.0710.

The euro hovered near a one-month high against the U.S. dollar before a much expected interest rate increase on Thursday where a hawkish European Central Bank might attract more buyers to the beleaguered currency.

In a sign that the euro's near term outlook has stabilized, it held above a key support line of $1.45 in early Asian trade, despite a warning from ratings agency Standard & Poor's on Monday that it would treat plans for a rollover of privately-held Greek debt being discussed as a selective default.

It was trading at $1.4526 and has managed to retain almost all of last week's 2.5 percent gain -- its best weekly performance since January.

With Greek default fears being relegated to the backburner for now, BNP Paribas strategists expect more real money investors and leveraged accounts to start buying euros if it becomes clear that any dips won't stay much below the $1.45 line.

Bond markets are fairly quiet with yields on ten-year U.S. Treasury notes holding above 3.18 percent, a rise of more than more than 30 basis points since last Monday.

U.S. crude futures stayed above the $95 per barrel line ahead of U.S. factory orders data later in the day.

(Additional reporting by Ian Chua in SYDNEY, Editing by Kevin Plumberg)

With help from its EU partners and fresh determination, the debt-ridden euro zone member will regain its fiscal sovereignty as soon as possible and aims to return to markets in the middle of 2014, as expected, the minister said.

"We will make it, because this is vital not only for Greece but for the stability of the whole euro zone and the global economy, because in Greece the stamina of the financial system is being tested," he told Reuters in the second part of an interview.

Appointed in a June 17 reshuffle and speaking after euro zone finance ministers approved on Saturday a critical, fifth tranche of a bailout loan to avert default, Venizelos said he was grateful to EU partners and vowed to fulfill his obligations.

He said he would redouble efforts to raise 1.7 billion euros ($2.5 billion) in privatizations by September, as agreed with the EU and the IMF who pulled Greece back from the brink of bankruptcy with a 110 billion-euro bailout a year ago.

Greece must deliver 50 billion euros in proceeds from a massive and complicated state selloff by 2015, including 5 billion this year. So far, in 18 months in office, the socialists have yet to launch any privatizations.

Amid the worst recession in nearly 40 years, good news for the economy comes from the tourism sector, which makes up about 15 percent of GDP. Revenues are seen rising by about 10 percent this year after a 25 percent slump in 2009-2010, Venizelos said.

"The data we have so far from the Tourism Ministry and the Bank of Greece are encouraging that it will be a good year. Revenues will rise by about 10 percent," he said.

A tough political veteran who has held several portfolios and prepared the 2004 Olympics, Venizelos took in his stride comments by Eurogroup chief Jean-Claude Juncker that Greece's sovereignty must be severely limited during the bailout program.

"Mr. Juncker is a great Philhellene (friend of Greece)," Venizelos said. "He doubtless wants to always help Greece and the euro zone overcome its problems and, primarily, to avoid systemic dangers.

"There is no doubt we have very tough fiscal limitations and we must restore our fiscal sovereignty as soon as possible through the successful implementation of our program," he added.

FOREIGN INSPECTORS

Venizelos denied suggestions foreign inspectors would be placed in ministries to check progress.

"There will be no inspectors," he said. "We can all resort to the knowhow and expertise of the EU and other member states. This does not mean inspectors will be posted or that responsibilities will be removed from the Greek parliament, the Greek government or the Greek public administration."

Venizelos said selloffs and the reform of the tax system were among his top priorities and that he would lay out a detailed plan to fight chronic tax evasion and improve tax collection, which has fallen behind target, next week.

Greece has 20 days from Saturday to set up a privatization body and Venizelos said he would unveil its board to fellow Eurogroup ministers on July 11.

"I will announce this after I complete discussions with the opposition on the 2-3 key people, because we need the widest possible consensus," he said.

The conservative opposition has opposed the bailout, drawing criticism from EU officials, but says it agrees with some parts of the privatization plan, raising hope some political consensus can be reached.

International lenders are working on a plan to provide Greece with an additional 110 billion euros to avoid default which could hit European banks and other lenders.

Asked about a warning by the S&P rating agency that banks' plans to roll over Greek debt could be seen as default, which drove down the euro on Monday, Venizelos said it was crucial that any model included the strictly voluntary participation of private lenders.

"As markets are strict and merciless, we want the format that results from the next program to have a shape that is accepted by markets and they react positively," he said.

(Editing by Peter Millership)

S&P said in a statement on Monday that Greece would likely be in default if it follows a debt rollover plan pushed by French banks, in a blow to plans to draft a new bailout plan in which EU policymakers want to involve private creditors.

"Moody's is not a party to ongoing discussions on the Greek debt roll-over," the firm said in a statement to Reuters, when asked to comment about the French proposal.

"Once the authorities finalize their decision, any rating implications will be assessed through our published methodologies and definitions," the statement said.

North European creditor nations, led by Germany, are insisting that banks and insurers must share the burden of any new financial support for Greece, which is estimated to need some 110 billion euros ($160 billion) in new funding until end-2014.

But European policymakers are also keen to avoid a default rating on Greece, fearing possible contagion effects to the rest of the euro zone.

French banks, major holders of Greek sovereign debt, proposed voluntarily renewing some of the bonds when they mature but on different terms, hoping the plan would not be considered a default.

According to the plan, bondholders would reinvest at least 70 percent of the proceeds from bonds maturing between now and the end of 2014 into new 30-year Greek debt.

In a report published last week, Moody's said it would view a distressed exchange -- which it qualified as an offer of a new debt instrument of diminished economic value meant to avoid bankruptcy -- as a default, but it did not specifically refer to the French plan.

In early June, before the French banks came up with their proposal, the head of Moody's sovereign ratings group said it was hard to see how a private sector rollover of Greek debt would be truly voluntary and it would therefore likely constitute a default.

Last month, Fitch said if it placed Greece's issuer rating on a "restricted default" because of a debt rollover plan the credit rating agency was likely to issue a new, higher rating within 14 days once the deal was done.

Officials at Fitch Ratings said on Monday they did not plan to make any further comment on the issue for the time being.

Greece is rated junk by the three major rating agencies.

(Reporting by Ingrid Melander; Editing by Diane Craft)

European politicians and bankers had expressed confidence last week that the French proposal would not trigger a default, but ratings agency Standard & Poor's said it would involve losses to debt holders, most likely earning Greece a "selective default" rating.

"It is our view that each of the two financing options described in the (French banks') proposal would likely amount to a default under our criteria," S&P said.

French banks, major holders of Greek sovereign debt, proposed voluntarily renewing some of the bonds when they fall due, but on different terms.

S&P cut Greece's sovereign rating to "CCC" last month, from "B," on a view that any restructuring of the country's massive debt load would count as an effective default.

The euro fell from around $1.4550 to a session low around $1.4510 after the latest S&P comment.

Derivatives industry body ISDA said before the French proposal was released in late June that a voluntary agreement to roll over Greek debt would "typically" not trigger payments on credit default swaps.

Greece was already facing an uphill struggle this week to start the process of selling off state-owned assets and reform its tax system to meet European Union and IMF conditions for bailing it out. The deep spending cuts required under the loan terms have sparked angry protests on the streets of Athens.

Eurogroup Chairman Jean-Claude Juncker said Greece will lose sovereignty and jobs to meet those criteria, a comment that has enraged unions. Any suggestion of foreign intervention in running the country is an incendiary political issue that will make implementing reforms even tougher.

Public-sector union ADEDY, which has launched crippling strikes and protests, reacted angrily to his comments.

ADEDY President Spyros Papaspyros said Juncker was out of line: "Mr Juncker interferes in the internal affairs of a country, provokes European rules and is an embarrassment for the country whose government tolerates him."

Juncker's comments could trigger more of the anti-austerity street protests that have roiled the country for months as Greece stays stuck in its worst recession since the 1970s with a youth unemployment rate of more than 40 percent.

"The sovereignty of Greece will be massively limited," Juncker told Germany's Focus magazine in an interview released on Sunday. Teams of experts from around the euro zone would be heading to Athens, he said.

"One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the euro zone," Juncker said.

EASIER SAID THAN DONE

Greece last week passed austerity measures worth 28 billion euros ($40 billion) and promised to deliver 50 billion euros in sell-off revenues by 2015, including raising 5 billion euros by the end of this year alone. On the list are public utilities whose sale is sure to prompt public reaction.

"Greece now needs to push faster fiscal adjustments and structural reforms," said EFG Eurobank economist Platon Monokroussos. "On the privatization front, it is of essence the government delivers fast results to send a strong signal to financial markets."

That is easier said than done.

The socialist government, which came to power on a social welfare platform, has yet to launch a single state sale in 18 months in power and must set up a privatization agency within weeks to meet its target.

It must also start to sell state property, estimated at up to 300 billion euros but often entangled in legal complications.

"The 50 billion euro target is not achievable," said Constantinos Mihalos, head of the Athens Chamber of Commerce. "Share values are very low right now because of the recession."

At the same time, Greece needs to deliver on pledges to reform a chronically inefficient tax system that has relied too much on middle class salary earners and let wealthy tax evaders off the hook, producing disappointing revenues this year.

Finance Minister Evangelos Venizelos told Reuters in an interview on Friday that Greece would tap for the first time private-sector expertise but tax offices around the country are notoriously resistant to any change.

"A greater effort is needed to rein in tax evasion and broaden the tax base in a bid to bring the ratio of revenues to GDP closer to euro area average and reduce expenditure and waste in the broader public sector," Monokroussos said.

Investors have feared that default by Greece would send shockwaves through the world finance system with some commentators saying such an eventuality could call the whole euro zone into question.

Another hurdle is the law on a uniform pay scale for the public sector, sure to cut further the salaries of civil servants who have already seen their pay reduced by an average 15 percent as a result of a wave of austerity measures to secure the 110-billion-euro bailout last year.

On Saturday, euro zone finance ministers approved a 12 billion euro loan Greece needs to avert default.

The IMF will meet on July 8 to approve the 12-billion euro loan tranche, which is expected to be handed over by July 15 and allow Greece to avoid the immediate threat of debt default.

But the country still needs the second rescue package, which is also expected to total around 110 billion. EU officials will now look at how private creditors can be involved voluntarily so that rating agencies do not declare the rescue a "credit event."

(Additional reporting by Wayne Cole in Sydney)

(Writing by Dina Kyriakidou and Emily Kaiser; Editing by Louise Ireland, Peter Millership and Neil Fullick)