* Dollar down 0.1 pct versus currency basket
* Risk appetite improves, U.S. stock futures rise
* Greece concerns remain, keeping euro vulnerable to losses
(Adds quote, detail)
By Naomi Tajitsu
LONDON, Feb 22 (Reuters) - The dollar slipped on Monday due
to a slight improvement in risk appetite after U.S. stocks eked
out gains on the view that the financial system had improved
enough for the Federal Reserve to increase its discount rate.
The euro pulled back from a nine-month low hit against the
dollar late last week, winning a respite from selling seen in
past weeks, although ongoing concerns about Greece's public
finances kept it vulnerable to more weakness.
The dollar trimmed some gains made when it rallied on Friday
after traders took the Fed's move to raise the rate at which it
offers emergency loans to banks as a signal for higher interest
rates, despite assurances from Fed policymakers to the contrary.
U.S. stock futures rose in tandem with many share markets
around the world on Monday, after U.S. equities clawed back from
initial losses on Friday after the Fed's announcement on cooling
speculation that higher U.S. rates may be coming soon.
"U.S. stocks ended higher on Friday, which was a positive
signal for risk appetite and currency crosses are reflecting
that," said Robert Minikin, currency strategist at Standard
Chartered in London.
He added this was supporting the euro against the dollar.
At 1219 GMT, the dollar slipped 0.1 percent lower against a
basket of currencies <.DXY> to 80.539. It pulled back from an
eight-month high of 81.342 hit on Friday in the wake of the Fed
discount rate hike, which surprised some in the market.
The euro <EUR=> was little changed at $1.3605, having
recovered from a fall to $1.3443 on Friday, its weakest since
May 2009.
SHORTING THE EURO
The euro bounced back from its trough on Friday after the
dollar came under selling pressure on the back of data showing a
smaller-than-forecast rise in U.S. consumer prices, which
indicated benign inflation and no hurry to raise rates.
Also bolstering the euro had been waning jitters about
Greece's indebtedness after a German magazine report - now
denied by the European Commission - about plans under which euro
zone countries would provide aid to Athens worth 20 billion-25
billion euros. []
But persistent concerns about Greece's ability to service a
spiralling budget deficit -- which has pushed the euro down more
than 10 percent from its December 2009 highs -- has kept
investors wary of taking significant positions in risky assets.
"This is just a pause in the overall euro downtrend, the
moves we have seen are flow-driven and I would expect more
dollar strength to come," said Westpac currency analyst Lauren
Rosborough.
Underlining negative sentiment on the euro, data late last
week showed currency speculators raised net euro short positions
to a record high.
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Risk demand was limited on Monday, as suggested by the rise
in the yen, which some in the market consider to be a safer bet
than higher-risk currencies.
The euro <EURJPY=R> fell half a percent to 124.18 yen,
retreating from an earlier climb as high as 125.25 yen, its
strongest since early February.
The higher-yielding Australian and New Zealand dollars also
fell against the Japanese currency, while the dollar slipped 0.3
percent to 91.30 yen <JPY=>, pulling back from a one-month high
of 92.16 on electronic trading platform EBS on Friday.
Market participants await Congressional testimony from Fed
chief Ben Bernanke on Wednesday and Thursday for clues into the
U.S. rate outlook in the aftermath of the discount rate rise.
(Additional reporting by Neal Armstrong, editing by Stephen
Nisbet)
