* Dollar modestly weaker, euro recovers from 9-mth low
* Impact of Fed's discount rate hike fades
* German media report on Greek bailout aids euro
* Yen gains suggest markets still nervous
(Adds quote, detail; changes dateline, previous LONDON; byline)
By Steven C. Johnson
NEW YORK, Feb 22 (Reuters) - The dollar was a touch lower on Monday as the impact of last week's surprise rise in a U.S. central bank emergency lending rate faded and a slight improvement in risk appetite helped lift U.S. share prices.
The euro recovered from a nine-month low against the dollar but lingering worries about Greece's public finances capped its gains, while the dollar edged lower against the yen.
The dollar rallied last week after the Federal Reserve raised the discount rate that banks are charged for emergency loans. The timing of the move was a surprise, and investors took it as the beginning of the end of an easy money regime that has weighed heavily on the greenback.
Policy-makers quickly sought to dispel that notion, though, saying the benchmark federal funds rate, which is the Fed's main monetary policy tool, will remain low for some time.
Fed Chairman Ben Bernanke is expected to issue similar reassurances in testimony before Congress later this week.
"This was not a signal of an imminent hike in the fed funds target rate, but it's clearly a signal that they wish to spend the next six months preparing for one," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
The euro was changing hands at $1.3611
Reports that Germany had prepared plans under which euro zone countries would provide 20 billion to 25 billion euros of aid to Athens helped ease some concern about the euro and boost overall risk appetite. [ID:nLDE61J05O]
That should support the euro against the dollar in the short run, Woolfolk said, and help stock prices globally. U.S. stock futures pointed to a higher open on Wall Street Monday.
Persistent concerns about Greece's ability to service its debt -- which has pushed the euro down more than 10 percent from its December 2009 highs -- has kept investors wary of taking on very large 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 have hit a record high. <-------------------------------------------------
For a graphic on euro positioning, click
http://graphics.thomsonreuters.com/0210/EZ_ERCFTC0210.gif ------------------------------------------------->
Elsewhere, sterling rose 0.1 percent to $1.5489
Yen gains showed the recovery in risk appetite was a tentative one, though. High-yielding currencies such as the Australian and New Zealand dollars, which tend to do well when markets are optimistic about growth, both fell against the low-yielding yen.
(Additional reporting by Naomi Tajitsu in London, Editing by Chizu Nomiyama)