* EUR/USD trapped below 55-day average in choppy trade
* Traders cite media reports on ECB's restructuring concerns
* Signs of short dollar positioning, says analyst
(Updates, adds quote)
By Jessica Mortimer and Naomi Tajitsu
LONDON, May 19 The euro trimmed losses in choppy trade on Thursday with traders citing demand from hedge funds and Middle East accounts, but uncertainty about the implications of a possible Greek debt restructuring limited gains.
Analysts said investors were looking for opportunities to start buying the euro and riskier currencies after recent falls, but concerns about euro zone debt kept the euro below its 55-day moving average around $1.4297.
Traders pointed to a report that quoted European Central Bank head Jean-Claude Trichet as saying the bank would not accept Greek bonds as collateral in the event of a restructuring. The same view was attributed to policymaker Juergen Stark by a bank spokesman. [ID:nFLAJGE7NK]
"There are signs of people wanting to put on new short dollar and long risk positions, but it is too early for the euro to rebound aggressively," said Sebastien Galy, currency strategist at Societe Generale.
"There is still a lot of noise from euro zone officials about how to go about finding a solution to the Greek debt problem."
Economists expressed doubts about whether the ECB would follow through on the threat over Greek collateral, describing it as a negotiating ploy designed to halt the momentum towards some form of restructuring. [ID:nLDE74I13Q]
The euro was up slightly on the day at $1.4255 EUR=, comfortably above a seven-week low of $1.4048 hit on Monday, and traders cited sovereign bids around $1.4200.
Support was also seen around $1.4245, the 200-hour moving average, and the 55-day moving average at $1.4235.
With Greece's debt problems seen coming to a head, the euro has taken a knock as investors cut back long positions in past weeks. This has pulled the single currency down from a 17-month high around $1.4950 hit earlier this month.
But fund managers argue the move was mainly driven by a reversal in short dollar positions on the back of a correction in commodities and other risky assets, which have fallen in volatile trade.
Those constructive on the euro expect a possible duration extension of Greek bonds or similar "soft restructuring" will ultimately be supportive for the single currency, particularly since the dollar is vulnerable to its own fiscal issues.
"I'm happy being long euro/dollar at these levels," said Pierre Lequeux, head of currency management at Aviva Investors, which manages around $371 billion in assets across a range of funds.
He said he would be interested in buying the currency as it falls further towards $1.40.
The dollar .DXY was down 0.3 percent against a currency basket at 75.263, below a six-week high hit on Monday of 76.001.
Earlier, Federal Reserve minutes were interpreted as suggesting U.S. monetary policy tightening was still some way off, even as some officials saw a rise in inflation risks. [ID:nN18279205]
But analysts said further rises in the euro were contingent on euro zone data or comments from ECB officials that would point to further rises in euro zone interest rates.
Gains in commodity and equity markets also encouraged investors to buy riskier currencies again. This weighed on the dollar and helped the commodity-linked Australian dollar AUD=D4 to rise 0.5 percent to $1.0682.
The low-yielding yen fell as investors took on more exposure to risk and after data showed the Japanese economy shrank much more than expected in the first quarter. [ID:nL4E7GJ01B]
The dollar hit a three-week high against the yen JPY= around 81.95 yen, though traders said gains were hampered by reported heavy demand to sell the currency at 82.00 yen.
Analysts argue that investors will remain reluctant to load up heavily on risk just yet given uncertainty over how Greek will resolve its debt problems.
(Additional reporting by Naomi Tajitsu; Editing by John Stonestreet)