* Dollar index retreats as risk tolerance rises
* ECB eyed for signs of unconventional easing
* G20 draft communique: to regulate big hedge funds
(Changes dateline, byline, adds quotes, updates prices PVS TOKYO)
By Veronica Brown
LONDON, April 2 (Reuters) - The dollar fell against a basket of major currencies on Thursday, as global stock markets rallied -- buoyed as some pieces of positive economic data kindled hope that the deep global recession might be moderating.
Global stocks as measured by MSCI's all-country index were up 1.8 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.
Sterling shot higher against the dollar and euro after housing figures showed the first rise in British prices since October 2007.
"Risk appetite has been picking up with the U.S. data. You could even argue about the UK housing price data moving in the same direction and giving a bit of reason for optimism," said Michael Klawitter, FX strategist at Dresdner Kleinwort in Frankfurt.
"But I would not really overestimate the current movements as they could reverse very quickly. Today's corrective move has to be taken with a pinch of salt," he added.
Trading ranges were fairly tight as markets awaited a European Central Bank policy decision later in the day.
The single currency bloc's central bank is seen cutting interest rates to a record low of 1 percent, leaving focus on what the central bank might say on unconventional easing.
Participants are keen to see if the ECB will follow the U.S., British, and Japanese central banks in buying corporate or government debt to boost money supply in a policy known as quantitative easing, though many doubt it is ready take that step.
The decision is due at 1145 GMT and ECB President Jean-Claude Trichet will answer questions at 1230 GMT.
"If Trichet mentions any untraditional measures this could be a negative surprise for the euro," said Toru Umemoto, chief FX strategist Japan at Barclays Capital.
The dollar plunged in March when the Federal Reserve announced it would buy large amounts of government debt, with investors fearing this would flood the market with dollars.
By 0821 GMT, the euro was up a quarter percent at $1.3265, but still in sight of Monday's two-week low near $1.3100 and chart support at its 100-day moving average of $1.3137.
The dollar index, a gauge of the greenback's strength against a basket of key currencies, dropped 0.1 percent to 85.301.
The euro rose 0.7 percent to 131.40 yen, while yen weakness also helped the dollar gain half a percent to 99.16 yen, eyeing a March peak of 99.69.
RISK TOLERANCE
Sterling rose 0.6 percent to $1.4556, while the euro fell 0.4 percent to 91.09 pence.
The Australian dollar picked up pace as a strong show by Asian and European stock markets and a gain of 1.4 percent in S&P futures indicated investors were tolerating more risk.
The Australian dollar rose 0.7 percent to $0.7032 on a bigger-than-expected trade surplus.
Investors were also keeping a close eye on possible steps for the global economy from a Group of 20 meeting on Thursday.
Contents of a draft communique from the Group of 20 leaders of developed and developing nations meeting in London held few surprises for the market.
The draft made no specific commitment to extra fiscal stimulus but said regulation would extend to systemically important hedge funds.
G20 leaders were also set to pledge to cooperate on economic policy, boost funds for the International Monetary Fund and refrain from competitive devaluations of their currencies as they seek to ward off a deepening global slump.
(Additional reporting by Charlotte Cooper in Tokyo)
(Reporting by Veronica Brown; Editing by Andy Bruce)