* Euro gains after smaller-than-expected ECB rate cut
* Euro rises to $1.3418 <EUR=> after ECB decision
* Yen, dollar index fall as risk tolerance rises <.DXY>
* G20 calls for additional $500 bln funds for IMF
* Swiss franc falls after Hildebrand FX comments
(Adds quotes, updates prices)
By Tamawa Desai
LONDON, April 2 (Reuters) - The euro jumped against the
dollar on Thursday after the European Central Bank cut interest
rates by a smaller-than-expected 25 basis points to 1.25
percent.
Markets had expected a 50 basis point cut. ECB President
Jean-Claude Trichet will hold a news conference at 1230 GMT
explaining the decision.
Participants are keen to see if the ECB will continue
cutting rates and whether it will follow other major central
banks in buying corporate or government debt to boost money
supply in a policy known as quantitative easing.
The ECB's key interest rate compares with near zero in the
United States, Britain and Japan.
"The ECB has surprised the market and the big question now
is if they are slowing the pace of traditional front will they
step things up on the unconventional front?" BNP Paribas
currency analyst Ian Stannard said.
The euro rose as high as $1.3418 from around $1.3330 shortly
before the ECB decision. It was last up 1.0 percent at $1.3370
<EUR=>.
Earlier, the dollar fell broadly in tandem with the yen as
risk appetite improved on the back of a global stock market
rally on hopes for a deep global recession to moderate and on
indications the G20 summit would produce more government action
to help the global economy.
"With the G20 meeting...the emphasis has gone from wondering
about fiscal stimulus to the role of the International Monetary
Fund. It seems likely that the IMF's financial resources can be
boosted substantially," said Robert Minikin, FX strategist at
Standard Chartered in London.
G20 sources said on Thursday the latest draft of the G20
communique calls for an increase of International Monetary Fund
resources by $500 billion, which would make available total
funding of $750 billion.
That would effectively triple the amount of resources for
the global financial institution, including an existing $250
billion that the IMF is already able to tap.
Global stocks as measured by MSCI's all-country index were
up 2.2 percent after U.S. factory and home sales data released
the previous day spurred optimism about the economy, even though
other numbers showed job losses mounting. []
The dollar index, a gauge of the greenback's strength
against a basket of key currencies, dropped 0.6 percent to
84.900 <.DXY>.
But broad yen weakness pushed the dollar to a five month
high at 99.90 yen <JPY=>. The euro rose 2.2 percent to 133.55
yen <EURJPY=R>.
Sterling rose 1.2 percent to $1.644 <GBP=> after hitting a
1-week high of $1.4716, while the Australian dollar was up 1.7
percent to $0.7105 <AUD=>.
But the Swiss franc fell versus the euro after Swiss
National Bank Vice-President Philipp Hildebrand said the bank
would use all means to prevent a further appreciation of the
Swiss franc. [].
The euro hit a session high of 1.5266 francs <EURCHF=>. The
SNB had stunned markets by buying foreign currency and bold
monetary policy measures on March 12.
The G20 was also close to agreeing a package of $250 billion
in financing to support global trade flows, a source at the
summit in London told Reuters.
(Additional reporting by Veronica Brown and Jessica Mortimer)
