* Euro rallies on German sentiment data, risk appetite
* G7 says pace of decline slowing, stocks rise
* U.S. automaker worries weigh on dollar
* Sterling falls as UK economy shrinks in 1st quarter
(Recasts, updates prices, adds comment, changes byline)
By Steven C. Johnson
NEW YORK, April 24 (Reuters) - The euro rose against the
dollar on Friday for a fourth straight session as improved
business sentiment in Germany added to hopes that the
euro-zone economy may already have seen the worst of the
recession.
Dollar demand faded as a stock market rally lifted
investor risk appetite, though analysts said worries that U.S.
automaker Chrysler may be nearing bankruptcy also hit the
greenback.
The dollar tends to rise with investor anxiety because
it's considered the safest store of value when economies
worldwide are contracting. It usually falls when risk appetite
grows.
"Equities are bid, keeping the dollar under pressure, and
recent data, particularly from Europe, supports the notion
that the pace of economic decline is at least not
accelerating," said Dustin Reid, currency strategist at RBS
Global Banking & Markets in Chicago.
The euro rose 0.9 percent to $1.3271 <EUR=> after earlier
rising above $1.33 for the first time in nearly two weeks. It
hit a two-week peak against sterling near 91 pence <EURGBP=>
after data showed the UK economy saw its sharpest contraction
in 30 years during the first three months of 2009.
The euro pared some gains after the Federal Reserve said
the top 19 U.S. banks need to hold a "substantial" amount of
capital above regulatory requirements, though it also said
most banks remain well capitalized. []
Finance chiefs from the Group of Seven most industrailized
countries on Friday said the pace of economic decline had
slowed and pledged to clean up banks' bad assets and restore
credit flows. []
The results of the government's bank stress tests are due
to be released on May 4.
RISKS AHEAD
The dollar fell 1.1 percent to 96.99 yen <JPY=> and
declined 1.2 percent to 1.1369 Swiss francs <CHF=>. Nick
Bennenbroek, head of FX strategy at Wells Fargo in New York
said "news that Chrysler looks like it's getting closer to
possible bankruptcy is weighing on the dollar."
The euro got a boost after Germany's Ifo business
sentiment survey rose in April, adding to a string of improved
euro-zone data this week. [].
George Davis, director for foreign exchange at RBC Capital
Markets in Toronto, said the euro "has been oversold for some
time, and with better-than-expected data in the region giving
support, there might be further gains in store."
Earlier this week, the euro hit a one-month low against
the dollar below $1.29 as investors speculated the European
Central Bank may not cut interest rates enough next month to
stimulate the economy.
Some analysts warned that market sentiment may yet take a
turn for the worse at any sign of new trouble in the banking
sector. RBS' Reid said he saw the euro's gain as a "sell-on-
rallies proposition more than a sustained rise."
Greg Salvaggio, senior vice president for capital markets
at Tempus Consulting in Washington, added that there is still
"significant concern out there that more than one of the
larger U.S. financial institutions will be deemed failures."
(Additional reporting by Vivianne Rodrigues; Editing by Jan
Paschal)
