FOREX-Dollar rises as aggressive Fed cut fears recede

                                
   (Recasts, updates prices, adds comments, changes byline,
dateline, previous LONDON)
                                
 By Lucia Mutikani
                                
 NEW YORK, Jan 25 (Reuters) - The dollar rose on Friday as
investors scaled back bets for another aggressive Federal
Reserve interest rate cut next week and on optimism a $150
billion stimulus package would help support the U.S. economy.
                                
 The Fed's emergency 75 basis point interest rate cut on
Tuesday, precipitated by sharp falls in global stocks, had seen
short-term interest rate futures pricing in a half percentage
point reduction in the central bank's overnight lending rate
next week when the Fed meets for a scheduled meeting.
                                
 Early on Friday, rate futures suggested a 38 percent chance
of a 50 basis point reduction in the fed funds rate target to 3
percent at the Jan. 29-30 policy meeting.
                                
  "The market now only expects another 25 basis points cut
out of the Fed," said Boris Schlossberg, senior currency
strategist at DailyFX.com in New York.
                                
  "The whole idea of U.S. interest rates going down
substantially has been taken off the table and that's tempering
any further euro gains, giving the dollar a little bit of
strength."
                                
 The euro dropped to a session low of $1.4690 <EUR=>,
according to Reuters data. It was last trading at $1.4700, down
0.4 percent on the day.
                                
 The dollar rose 0.7 percent to 107.65 yen <JPY=> as the tax
stimulus package calmed fears the United States would slip into
recession, leading global stocks higher and pushing Wall Street
to a firmer open.
                                
 Stock market moves are often regarded as a barometer of
risk appetite, and financial markets have calmed down after
swinging wildly earlier in the week.
                                
 Against the Swiss franc, the dollar rose 0.9 percent to
1.0967 <CHF=>.
                                
 But stronger global equities whetted investors' risk
appetite, pushing down the dollar against higher yielding
currencies such as the British pound and the Australian
dollar.
                                
 Sterling gained 0.2 percent to $1.9824 <GBP=>, while the
Australian dollar climbed 0.2 percent to US$0.8832 <AUD=>.
                                
 Weaker-than-expected consumer inflation data drove down the
Canadian dollar against the greenback as it backed expectations
of a rate cut from the Bank of Canada.
                                
 The dollar rose 0.4 percent to C$1.0070 <CAD=>.
 (Editing by Andrea Ricci)