FOREX-Euro, yen crosses edge up as stocks rally

* Euro up 0.2 pct at $1.4239 EUR=, up 0.4 pct vs yen

* Aussie dollar hits 6-wk high of $0.8229 AUD=D4

* European shares up; focus on U.S. Q2 GDP at end of week

(Adds quotes, updates prices, changes dateline prvs TOKYO)

By Tamawa Desai

LONDON, July 27 (Reuters) - The euro and commodity-linked currencies held firm on Monday, underpinned by gains in stocks and oil prices, but moves were limited ahead of U.S. GDP data and record sales of U.S. Treasuries later in the week.

The market was also keeping an eye on talks between top U.S. and Chinese officials in Washington on Monday and Tuesday for any comments regarding the U.S. currency.

European shares rose in early trade after Tokyo shares hit a nine-month high and the Dow Jones average and the S&P 500 closed at eight-month highs on Friday. Oil prices rose towards $69 a barrel on Monday.

"Investors are overall still optimistic for global growth, so the dollar and yen should remain on the back foot," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

Data on Monday showed German consumer sentiment rose to 3.5 in August, a 14-month high, from an upwardly revised reading of 3.0 for July, and higher than forecasts for 2.9. [ID:nLO132436]

Separate data showed German import prices fell by 11.3 percent year-on-year in June, the biggest fall since February 1987, compared with the Reuters consensus forecast for a drop of 11.2 percent. [ID:nLR78073]

By 0746 GMT, the euro rose 0.2 percent to $1.4238 EUR=, not far off a seven-week high of $1.4292 set last week or its 2009 peak of $1.4339 hit in early June. It also gained 0.4 percent to 135.25 yen EURJPY=R.

The Australian dollar climbed 0.4 percent to $0.8206 AUD=D4, also not far off a six-week high of $0.8229 or its peak for the year of $0.8265. Against the yen, it rose 0.4 percent to 77.91 yen AUDJPY=R.

The dollar index .DXY, a measure of its performance against six major currencies, slipped back towards a seven-week low forged last week, but the greenback was steady on the day against the yen at 94.97 yen JPY=.

Data from the Commodity Futures Trading Commission on Friday showed currency speculators nearly doubled their bets against the dollar in the week ended July 21, with the value of dollar net short positions reaching its highest since mid-July 2008. [ID:nN24481747]

U.S. gross domestic product, due on Friday, is expected to show the economy contracted for a fourth consecutive quarter in April-June, the first time that has happened in records dating to 1947. [ID:nN24483077]

Forecasts are for a contraction at an annual rate of 1.5 percent, less than the annual pace of decline in the first quarter of 5.5 percent. Some analysts expect it to be the last negative quarter of this recession.

"With market volatility declining toward more normal levels, it could be a case where the dollar strengthens on stronger U.S. economic data," BTM-UFJ's Hardman said.

Meanwhile, the U.S. Treasury sells a record $115 billion this week and the bond and currency markets are keen to see how demand holds up in the face of rising stock markets and a potentially improving economic backdrop.

"Supply concerns could underpin dollar/yen on the week, and as long as 94.20 yen support holds, a target of 96.70 yen on the week is not unreasonable," said analysts at RBC Capital Markets.

Markets showed limited reaction to remarks by Federal Reserve Chairman Ben Bernanke, who reaffirmed his view of an improving but still vulnerable U.S. economy, saying the jobless rate was likely to stay high even when the economy exited recession sometime in the next few months. [ID:nN26477938] (Additional reporting by Charlotte Cooper in Tokyo; Editing by Ruth Pitchford)