Euro holds firm ahead of ECB, Aussie scales peaks

LONDON, June 6 (Reuters) The euro held steady against the dollar on Wednesday as markets anticipated a European Central Bank interest rate hike, with focus on any hints ECB president Jean-Claude Trichet might give on further tightening.

Amongst higher-yielding currencies, the Australian dollar surged to a 17-year peak against the U.S. dollar after robust first-quarter growth data suggested Australian rates could rise further, helping lift the New Zealand dollar to its highest since being floated in 1985.

Markets widely expect the ECB decision at 1145 GMT will result in a quarter-point hike to 4.0 percent, leaving the spotlight firmly on Trichet's post-decision news conference for clues on how many more hikes are in the offing this year.

''Our general perception is that the ECB will continue tightening policy and even deliver up to 4.75 percent during the next year, but markets are already pricing in almost two additional hikes so it will be quite difficult for Trichet to top these expectations,'' Tobias Thygesen, senior analyst at Danske Markets said.

''We expect him to be relatively hawkish and signal that monetary tightening isn't at the end yet, but that doesn't mean that we will see the euro strengthening,'' he said.

By 0800 GMT, the euro stood at $1.3525, holding above an eight-week low of $1.3391 hit late last week.

The dollar has come under pressure despite a raft of upbeat economic data reinforcing the view that the Federal Reserve is in no hurry to cut rates from 5.25 percent.

Cleveland Fed President Sandra Pianalto said U.S. inflation hovering around 3 percent since 2005 was too high for comfort.

Comments from Fed Chairman Ben Bernanke on Tuesday that the U.S. housing market will continue to be a drag on growth knocked the dollar lower in spite of data showing U.S. service sector activity picking up to a 13-month high.

The dollar steadied at 121.42 yen but struggled to overcome a heavy array of sell orders near 122 yen after reaching a four-month high of 122.14 last week.

The euro was steady at 164.22 yen, having hit a peak of 164.61 on Tuesday.

AUSSIE SURGES, YEN FALLS The Australian dollar jumped to a 17-year high of US$0.8439 after data showed the country's economy expanded at a 1.6 percent clip in the January-March quarter from the previous quarter, easily surpassing forecasts.

Earlier, the Reserve Bank of Australia kept rates on hold at 6.25 percent but the strong economy is seen keeping alive the possibility of higher rates if inflation reaccelerates.

The Australian dollar also rose to its highest versus the yen since April 1992, while the New Zealand dollar pushed back towards a 17-year peak struck on Tuesday.

''Markets are trading on the back of strong risk appetite and incoming data supports the market's view that growth is good. As long as equity markets reflect this positive sentiment, expect good support for the AUD,'' BNP Paribas said in a note.

High-yielding currencies including sterling have scaled successive multi-year peaks against the yen as investors continue their search for higher yield.

Traders will also keep an eye on a summit of the Group of Eight nations in Germany that begins later in the day to see if officials from the world's richest nations will comment on issues pertaining to monetary policy or currency movements.

REUTERS PV