FOREX-Euro under pressure as ECB rate cuts seen

(Changes byline, updates prices and adds quotes)

By Simon Falush

LONDON, Feb 8 (Reuters) - The euro was on track for its biggest weekly fall versus the dollar in 1-1/2 years on Friday, after European Central Bank President Jean-Claude Trichet left the door open for an interest rate cut later this year.

The ECB kept policy on hold at 4 percent on Thursday but Trichet dropped a threat to act pre-emptively against rising prices and accepted that unusually high uncertainty in markets may hurt the real economy.

"There's clearly a perception that the ECB now has an easing bias but they are unlikely to cut rates as early as March," said Michael Klawitter, FX strategist at Dresdner Kleinwort in Frankfurt.

"However any more signs of weakness in the growth outlook will fuel expectations of an early cut and cyclical headwinds are clearly increasing," he added.

By 1127 GMT the euro was steady at $1.4483 EUR=, down around 2.2 percent since Monday and on track for its biggest weekly fall since June 2006.

The euro was down 0.26 percent at 155.30 yen EURJPY=, while the dollar edged down to 107.31 yen JPY=.

Trade was relatively quiet, as many Asian players are away for the Lunar New Year break. Financial markets in Tokyo will be closed on Monday for a national holiday.

Sterling was up around a third of a percent versus the dollar GBP= and euro EURGBP=, recovering some of Thursday's losses sustained after the Bank of England cut rates by 25 basis points to 5.25 percent and signalled that it would likely stick with a path of gradual monetary easing.

FX SIDE-ISSUE FOR G7

Investors were reluctant to take big currency positions before a weekend meeting of Group of Seven finance officials in Tokyo.

The summit may yield some comments on currencies, though forex is not expected to take centre stage.

Although the euro is now some 5 cents -- or 3 percent -- below last November's record high versus the dollar, it is still more than 10 percent higher than a year ago and on the ECB's trade-weighted basis it is holding just below all time peaks set in January EUREER=ECBF.

Many European officials have expressed concern about the euro's strength, with French trade minister Henri Novelli saying on Friday that lower interest rates in the region would help companies struggling under the impact of a stronger currency.