FOREX-Dlr slips on improving risk demand, U.S. stocks

* Dollar down 0.1 pct versus currency basket

* Risk appetite improves, U.S. stock futures rise

* Greece concerns remain, keeping euro vulnerable to losses

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By Naomi Tajitsu

LONDON, Feb 22 (Reuters) - The dollar slipped on Monday due to a slight improvement in risk appetite after U.S. stocks eked out gains on the view that the financial system had improved enough for the Federal Reserve to increase its discount rate.

The euro pulled back from a nine-month low hit against the dollar late last week, winning a respite from selling seen in past weeks, although ongoing concerns about Greece's public finances kept it vulnerable to more weakness. The dollar trimmed some gains made when it rallied on Friday after traders took the Fed's move to raise the rate at which it offers emergency loans to banks as a signal for higher interest rates, despite assurances from Fed policymakers to the contrary.

U.S. stock futures rose in tandem with many share markets around the world on Monday, after U.S. equities clawed back from initial losses on Friday after the Fed's announcement on cooling speculation that higher U.S. rates may be coming soon.

"U.S. stocks ended higher on Friday, which was a positive signal for risk appetite and currency crosses are reflecting that," said Robert Minikin, currency strategist at Standard Chartered in London.

He added this was supporting the euro against the dollar.

At 1219 GMT, the dollar slipped 0.1 percent lower against a basket of currencies <.DXY> to 80.539. It pulled back from an eight-month high of 81.342 hit on Friday in the wake of the Fed discount rate hike, which surprised some in the market.

The euro was little changed at $1.3605, having recovered from a fall to $1.3443 on Friday, its weakest since May 2009.

SHORTING THE EURO

The euro bounced back from its trough on Friday after the dollar came under selling pressure on the back of data showing a smaller-than-forecast rise in U.S. consumer prices, which indicated benign inflation and no hurry to raise rates.

Also bolstering the euro had been waning jitters about Greece's indebtedness after a German magazine report - now denied by the European Commission - about plans under which euro zone countries would provide aid to Athens worth 20 billion-25 billion euros. [ID:nLDE61J05O]

But persistent concerns about Greece's ability to service a spiralling budget deficit -- which has pushed the euro down more than 10 percent from its December 2009 highs -- has kept investors wary of taking significant positions in risky assets.

"This is just a pause in the overall euro downtrend, the moves we have seen are flow-driven and I would expect more dollar strength to come," said Westpac currency analyst Lauren Rosborough.

Underlining negative sentiment on the euro, data late last week showed currency speculators raised net euro short positions to a record high. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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Risk demand was limited on Monday, as suggested by the rise in the yen, which some in the market consider to be a safer bet than higher-risk currencies.

The euro fell half a percent to 124.18 yen, retreating from an earlier climb as high as 125.25 yen, its strongest since early February.

The higher-yielding Australian and New Zealand dollars also fell against the Japanese currency, while the dollar slipped 0.3 percent to 91.30 yen , pulling back from a one-month high of 92.16 on electronic trading platform EBS on Friday.

Market participants await Congressional testimony from Fed chief Ben Bernanke on Wednesday and Thursday for clues into the U.S. rate outlook in the aftermath of the discount rate rise. (Additional reporting by Neal Armstrong, editing by Stephen Nisbet)