* Euro slips as ECB expected to lower rates
* BoE looks set to cut rates to near zero, hurting sterling
* Dollar hovers near 4-month high vs yen
* Australian dollar trims previous day's gains after data
By Rika Otsuka
TOKYO, March 5 (Reuters) - The euro slipped against the dollar and the yen on Thursday as investors expect the European Central Bank to cut interest rates later in the day to help the faltering euro zone economy.
Sterling also fell against the U.S. currency as the Bank of England looks set to lower interest rates to close to zero on Thursday and announce it will start raising the money supply to drag Britain out of recession.
The dollar stayed within sight of a four-month high against the yen as investors were concerned about a deteriorating economy and deepening political uncertainty in Japan.
The ECB is expected to cut interest rates to an all-time low of 1.5 percent on Thursday and slash its 2009 and 2010 economic forecasts to reflect the rapid pace of deterioration in the euro zone.
"In addition to a rate cut, investors will watch whether the ECB comes up with measures to help solve the problems the euro zone is facing as its neighbouring countries, as well as some of its members, are stumbling," said Tsutomu Soma, a senior manager in the foreign securities department at Okasan Securities.
The euro is likely to fall back towards a three-month trough hit against the dollar on Wednesday if the central bank fails to come up with such measures, Soma said.
The European single currency fell 0.5 percent from late U.S. trade to $1.2593.
On Wednesday it fell as low as $1.2457 on trading platform EBS, its lowest since late November, then rebounded as news about China's latest stimulus package and data suggesting its economy is beginning to recover rekindled investors' risk appetite.
The euro slipped 0.4 percent against the yen to 125.07 yen.
Economists expect the ECB to renew its pledge to support money markets back into health.
There is also hope ECB President Jean-Claude Trichet will use a post-meeting news conference to hint the central bank is closer to deciding on unconventional ways to boost the euro zone once it runs out of ammunition with interest rates, they said.
Sterling was down 0.3 percent at $1.4149.
KEY YEN LEVEL IN SIGHT
The dollar inched up 0.1 percent to 99.25, hovering just below a four-month high of 99.49 yen hit on EBS.
"The dollar is likely to climb above the key 100 yen level," said Shuichi Kanehira, senior vice president of the forex division at Mizuho Corporate Bank. "But its rise above that level may only be temporary as many players are expected to book profits on the dollar's recent rally."
The dollar has staged a sharp and rapid rebound from a 13-1/2-year low of 87.10 yen reached in late January as investors sought the safety of the U.S. currency, which benefits from its role as the world's reserve currency, amid the global recession and stock market slump.
Meanwhile, the yen has lost its status as a safe-haven currency as the global downturn has taken a toll on Japan's export-dependent economy, which shrank a record 3.3 percent in the fourth quarter.
Government data on Thursday showed Japanese firms' capital spending tumbled 17.3 percent in October-December from the same period a year earlier, pointing to a downward revision of gross domestic product for the quarter next week.
The Australian dollar fell 1.0 percent to $0.6430, giving up some of the previous day's hefty gains, after weaker-than-expected housing and trade data bolstered arguments the Reserve Bank of Australia will need to resume cutting interest rates in April. (Editing by Michael Watson)