FOREX-Euro rises as ECB interest rate cut hopes fade

                                
 (Updates prices, adds comments, changes byline)
                                
 By Vivianne Rodrigues
                                
 NEW YORK, Jan 24 (Reuters) - The dollar fell against the
euro on Thursday as tough inflation comments by a European
Central Bank official and strong German business confidence
data dashed hopes for a near-term interest rate cut in the euro
zone.
                                
 An improvement in investors' appetite for risk, following a
sharp rebound in European stocks and gains in U.S. equities,
pushed down the U.S. dollar versus high-yielding currencies
such as the British pound and the Australian and Canadian
dollars.
                                
 ECB governing council member Axel Weber said the Federal
Reserve's surprise decision to cut its key overnight lending
rate by 75 basis points to 3.50 percent on Tuesday had not
shifted the ECB focus on euro zone inflation, dampening rising
expectations that it too will have to cut rates soon.
                                
 "The ECB comments combined with the strong report in
Germany, poured cold water on rate-cut expectations in Europe
and boosted the euro," said Omer Esiner, a market analyst at
Ruesch International in Washington D.C.
                                
 The euro rose 0.8 percent and traded at $1.4759 <EUR=>, on
track for a third day of gains. It rose 1 percent to 157.67
yen <EURJPY=>.
                                
The dollar was up 0.1 percent at 106.85 yen <JPY=>, after
earlier slipping to 105.95 yen. Against the Swiss franc, the
dollar fell 0.4 percent to 1.0863 <CHF=>.
                                
 "The fact that there seems to be a bit of calm in the
equity markets has in some regard sent the forex market towards
selling dollars," said John McCarthy, director of trading at
ING Capital Markets in New York.
                                
 STRONG GERMAN DATA HELPS
                                
 The euro came under selling pressure in recent weeks as
signs emerged that weakness in the U.S. economy was having a
knock-on effect on the euro zone, fueling the argument for a
rate cut by the ECB.
                                
 Some of those concerns eased slightly on Thursday after the
Ifo economic research institute reported that German corporate
sentiment unexpectedly rose in January, bolstering
policy-makers' assertion that the euro zone economy can
withstand turmoil in financial markets. [ID:nL24345341].
                                
 Euro zone rate futures, which were pricing in 75 basis
points of ECB easing this year from 4 percent currently, fell
back sharply on Thursday after Weber's comments.
                                
 The Australian dollar benefited from the improvement in
risk appetite and a surge in the price of gold by 2 percent
above $900 an ounce. The Australian dollar <AUD=> rose 0.6
percent to US$0.8789, while its New Zealand counterpart leapt
0.9 percent to U$0.7737 <NZD=>.
                                
 There was little reaction to a report showing that the pace
of existing-home sales in the United States fell 2.2 percent in
December to a slower-than-expected 4.89 million-unit annual
rate.
                                
 "Downside surprises have long lost some of their capacity
to hurt risk appetite. The broader dollar tone will remain
modestly negative, hurt in the main by reduced risk aversion
inflows," said Alan Ruskin, chief international strategist at
RBS Greenwich Capital in Greenwich, Connecticut.
 (Additional reporting by Lucia Mutikani; Editing by Richard
Satran)