* Euro up as ECB cuts rates by only 25 bps
* Trichet talk of non-standard measures curbs euro gains
* Yen, dollar index fall as risk tolerance rises
* G20's call for more IMF funding boosts risk appetite
* Swiss franc falls after Hildebrand's FX comments
(Updates prices, adds quotes and details from G20 meeting)
By Steven C. Johnson
NEW YORK, April 2 (Reuters) - The euro jumped against the
dollar on Thursday after the European Central Bank delivered a
smaller interest-rate cut than expected and hinted vaguely
that it could adopt more aggressive means to boost growth.
Optimism also surged as leaders from 20 high-income and
developing countries pledged to boost world output and agreed
to add $500 billion to International Monetary Fund coffers.
The euro soared to nearly $1.35 after the ECB cut lending
rates to 1.25 percent, confounding expectations for a deeper
cut to 1 percent, but eased a bit as ECB President Jean-Claude
Trichet refused to rule out additional rate cuts in future.
He also said officials had yet to decide on "non-standard"
policy measures and would offer more details at the central
bank's next policy meeting in May.
Markets were on alert for signs the ECB planned to follow
other central banks by buying corporate or government debt to
stimulate bank lending, a move that would likely spur growth,
but could also undermine the euro through increased supply.
"The ECB is still concerned about preserving the integrity
of its currency," said Boris Schlossberg, head of FX research
at GFT Forex in New York. "They do not want to debase it in
any way, shape or form by doing radical unconventional
measures."
The euro rose 1.6 percent to $1.3440 <EUR=>, near a
session peak of $1.3489, and added 2.5 percent against Japan's
yen to 133.80 yen <EURJPY=>.
The dollar also gained against the yen, rising 1 percent
to 99.52 yen <JPY=> after earlier touching 99.90, a five-month
high.
The Group of 20 agreement, struck after a meeting in
London, whetted investors' risk appetite, igniting a rally in
stocks and driving the Dow Jones industrial average <>
back up above 8,000 for the first time since Feb. 10, while
slowing safe-haven flows into the dollar and yen.
The decision to increase IMF funding was positive for the
euro, as it could help battered eastern European economies
where euro-zone banks have been active.
Sterling rose 1.5 percent to $1.4689 <GBP=> while the
Australian dollar <AUD=>, which boasts the highest interest
rates among developed countries, rose 2.7 percent to $0.7166.
"The bottom line is that it's a positive for risk appetite
... I think the dollar is under pressure as a result," said
Ruesch International market strategist Omer Esiner.
ECB QUESTIONS REMAIN
Whether that sense of optimism can endure is another
story, analysts said, and from a currency market perspective,
it may depend largely on the ECB's next move.
Regarding ECB quantitative easing, the process of flooding
the banking system with money to kick-start lending and boost
growth, "there is still an 'if," said John McCarthy, director
of foreign exchange at ING Capital Markets in New York.
Trichet "leaves enough wiggle room," he added. "They are
not ruling anything out, but not announcing anything today."
But Alan Ruskin, international strategist at RBS Greenwich
Capital, said markets may yet reassess the ECB's stance.
"The initial inclination is simply to follow bond spreads
around, which is euro positive," he said. "But I fear that
without quantitative easing, the market will soon be feeling
that neither the euro-zone periphery nor its Eastern European
neighbors have the appropriate central bank support they need,
and that will soon drag the euro back down."
At the Swiss National Bank, Vice President Philipp
Hildebrand -- unlike his ECB counterparts -- fired a clear
warning shot on Thursday, saying the central bank will use all
means to prevent further gains in the Swiss franc.
The SNB has started buying corporate and government debt
and intervened last month to weaken the franc, which fell on
Thursday against the dollar and euro [].
(Additional reporting by Wanfeng Zhou, Nick Olivari and
Gertrude Chavez-Dreyfuss; Editing by Jan Paschal)
