FOREX-Dollar boosted by Citi results but sentiment shaky

* Citi's smaller-than-expected loss eases credit fears

* Euro capped as Trichet notes risks to growth

* Broad dollar sentiment still clouded by financial woes (Updates prices, adds comments, changes byline)

By Wanfeng Zhou

NEW YORK, July 18 (Reuters) - The dollar rose on Friday, heading for its largest weekly gain versus the euro in a month, after a smaller-than-expected quarterly loss from Citigroup Inc (C.N) eased worries about the U.S. financial sector.

Citi's results added to positive earnings news this week from Wells Fargo & Co. (WFC.N) and JPMorgan Chase & Co (JPM.N). That allowed the dollar to regain some strength after slumping to a record low against the euro on Tuesday.

"Citi earnings have encouraged the market to take on more risk and given (the dollar) a lift," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto.

They were "consistent with other bank earnings seen earlier this week, which has turned sentiment around on the dollar a little bit."

In late afternoon trading in New York, the dollar index, which tracks the greenback's performance against a basket of six major currencies, was up 0.2 percent at 72.191 .DXY.

The euro slipped 0.1 percent to $1.5841 EUR=, well off its record high of $1.6037 set on Tuesday. The dollar was up 0.7 percent against the yen JPY= at 106.94 yen.

The euro was capped by European Central Bank President Jean-Claude Trichet's comments published on Friday that euro-zone growth is likely to be weak in the second and third quarters before staging a recovery.

Risks to growth were on the downside, Trichet said in a joint interview with four European newspapers. [ID:nL18138509].

"There's an emerging consensus of the euro's inability to show any convincing gains above $1.5950 or $1.60," said Ashraf Laidi, chief currency strategist at CMC Markets in New York.

"The euro is being set up for renewed weakness next week," he added, particularly if the Ifo survey survey shows further business sentiment weakness in Germany, the euro zone's largest economy.

Sterling edged down by 0.2 percent to $1.9973 GBP= on speculation the UK government would increase borrowing. See [ID:nL17632891].

For the week, the euro has lost 0.7 percent against the dollar, while the dollar rose 0.8 percent against the yen.

SENTIMENT STILL SHAKY

Despite the dollar's recovery on Friday, sentiment on the currency was still shaky, analysts say.

The U.S. currency came under heavy pressure earlier this week after turmoil as Fannie Mae and Freddie Mac heightened concerns about the stability of the U.S. financial sector and Federal Reserve Chairman Ben Bernanke said U.S. financial markets and institutions remain under "considerable stress."

"We're getting lots of conflicting data. There seems to be no real consensus regarding the outlook for the U.S. financial sector or the U.S. economy as a whole," said Gareth Sylvester, a senior currency strategist at HiFX in San Francisco.

"The market is trying to look at the positives...but each time they think that this credit crunch and subprime debacle has passed, something happens to bring that to the forefront again."

Freddie Mac (FRE.N) said in a Securities and Exchange Commission filing it expects to purchase mortgages with higher unpaid principal balances and that realized credit losses will keep increasing.[nN18486980].

Freddie Mac is still committed to raising $5.5 billion in fresh capital through offerings including common and preferred shares, but on Friday it said it has no immediate plans to raise the funds. (Additional reporting by Nick Olivari; Editing by Leslie Adler)