FOREX-Dollar falls to 1-month low, German data awaited

By Rika Otsuka

TOKYO, May 21 (Reuters) - The dollar hit a one-month low against a basket of currencies on Wednesday after comments from a German government official stoked expectations of higher euro zone interest rates.

The U.S. currency was also dented against the yen as a fall in Asian stocks prompted investors to unwind risky carry trades, in which the low-yielding yen is used to finance purchases of assets giving higher returns elsewhere.

The dollar was also hurt by crude oil's rise to record highs near $130 a barrel CLc1 and a surge in gold XAU= as investors are concerned about the U.S. economy, which is facing weak growth and quickening inflation.

Investors are now awaiting Germany's Ifo index of business sentiment for May due later in the day for more clues on whether the euro will extend its gains.

"Better-than-expected Ifo data is likely to boost the euro further," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.

"If the euro manages to climb steadily above $1.57, the European single currency will be set to rise towards its all-time high against the dollar," Shioiri said.

The dollar index hit fresh one-month lows near 72.30 after recovering to 72.5 .DXY, still down 0.1 percent on the day.

The euro rose to $1.5667 EUR=, up 0.1 percent from late U.S. trading on Tuesday. It hit all-time highs above $1.60 in April.

Wolfgang Franz, the president of Germany's ZEW economic research institute and a member of the government's panel of economic advisers, said on Tuesday that he thought the European Central Bank would lift rates soon. The institute's survey on investors' sentiment, however, unexpectedly worsened in April. [ID:nL2027040]

The ECB has held interest rates at 4 percent since last June.

The dollar fell 0.4 percent against the yen to 103.25 yen JPY=.

The euro slipped 0.3 percent against the Japanese currency to 161.70 yen EURJPY=R as investors trimmed yen carry trades.

The Australian dollar was at $0.9598 AUD=D4 falling from a 24-year high of $0.9619 hit on Tuesday, when the minutes of the Reserve Bank of Australia's meeting in May showed it actively considered raising interest rates as inflation was uncomfortably high.

Investors will take a careful look at the minutes of the Federal Reserve's policy meeting on April 29-30 due at 1800 GMT for hints on Fed officials' views on inflation risks and the outlook for the economy.

"Further dollar selling is expected if the minutes give an impression that the Fed is more concerned about the economic growth than inflation, pushing back expectations for a U.S. rate hike," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities.