* Rising ECB rate cut expectations keep euro subdued * Trading light due to U.S. holiday * Euro falls to 11-1/2 yr low vs Swedish crown By Michelle Chen and Anirban Nag LONDON, July 4 The euro slipped against the dollar and the yen on Wednesday as grim economic data strengthened expectations the European Central Bank is about to cut interest rates, likely keeping the shared currency under pressure. It slumped to a 11-1/2 year low against the higher-yielding Swedish crown after Sweden's central bank kept interest rates unchanged and only slightly trimmed its forecasts for future borrowing costs, despite risks from the euro zone crisis. The euro was also under pressure as Spanish government bond yields crept higher before an auction on Thursday, although traders said some investors were on the sidelines given a U.S. market holiday that kept volumes on the low side. The euro shed 0.2 percent against the dollar to hit$1.2565, keeping well below resistance at $1.2693, a high reached last Friday after European leaders hammered out a deal to tackle the region's debt crisis. "The market looks primed for a 25 basis point cut by the ECB, but something more like a liquidity injection would be needed to lift the euro," said Paul Robson, currency strategist at RBS. "Investors will also want to see if the ECB President (Mario Draghi) will highlight downside risks to growth and inflation, which will set the ground for more easing." Pressure on the ECB to ease policy has gathered pace as tight credit conditions added to fiscal tightening and austerity to deepen the region's economic slowdown. Near-term inflation pressures have also eased following a sharp drop in energy prices over the last couple of months, giving extra scope for a rate cut. Data on Wednesday showed Germany's services sector unexpectedly stagnated in June. While a contraction in France's services sector eased, business expectations slumped to their lowest in three years, underlining how bleak conditions in Europe are. Analysts said while a slew of measures to support growth from the ECB could help the euro, any disappointment could put the currency under fresh pressure and bring the June 28 low of $1.2407 back into focus. "I'm looking for the euro to fall further. The only scenario I see for the euro zone if it's going to stay together is much more significant easing and involvement from the ECB," said John Hardy, currency strategist at Saxo Bank, who forecast the euro to hit $1.23 in one month. BOND REDEMPTIONS The euro fell 0.3 percent against the yen to 100.31 after Japanese investors received principal on redeemed euro zone bonds which was swiftly converted to yen, traders said. The dollar was up 0.4 percent against the Japanese currency at 79.82 yen. Recent weak data out of the United States and Europe has spurred expectations of more stimulus from the ECB and the Federal Reserve. While easing global monetary conditions should bolster risk appetite and may lend some support to the euro, it is likely to underperform the growth-linked currencies as a lower interest rate would be euro-negative. Flooding markets with extra cash tends to drive investors to chase higher-yielding currencies. "We are short euro against the commodity currencies like the Aussie, the New Zealand dollar and the Swedish crown," said Stuart Frost, head of Absolute Returns and Currency at fund managers RWC Partners. The euro fell to a 4-1/2 month low against the Australian dollar around A$1.2211. The common currency slid to an 11-1/2 year low of 8.6800 against the Swedish crown as long-term investors and hedge funds sold the euro after the Riksbank kept rates unchanged at 1.5 percent as expected. Traders said a hedge fund sold and stop loss orders were triggered on the break of 8.70 crowns, but many were cautious of pushing the crown higher given Sweden's exposure to the euro zone and the possibility of future Riksbank rate cuts.