FOREX-Dollar higher, euro undermined by ECB rate-cut expectations

(Adds reports that ISM Manufacturing data was inaccurate)

* Investors see easing steps at Thursday's ECB meeting

* Currency speculators increase short bets on euro -IMM

By Daniel Bases

NEW YORK, June 2 (Reuters) - The U.S. dollar rose on Monday, aided by subdued German inflation figures and slower-than-expected manufacturing growth in the euro zone, both of which piled pressure on the European Central Bank to ease monetary policy aggressively this week.

The U.S. dollar index rose 0.36 percent on Monday against a basket of currencies from its main trading partners. The index is hovering at a two-month high.

Attention remains squarely on the ECB's policy meeting on Thursday and the U.S. payrolls report for May on Friday.

"The euro has been trading on the softer side in general as we go into the ECB meeting as there is some level of caution here," said Alan Ruskin, global head of G19 currency strategy at Deutsche Bank in New York.

"Plenty of speculation that they don't deliver enough monetary easing or that they deliver, but it is already priced in we fall into a 'buy the rumor sell the fact' scenario," he said.

Currency speculators increased short positions in the euro to 16,633 contracts from 9,220 last week, according to data for the week ended May 27 released by the Commodity Futures Trading Commission on Friday.

The ECB is preparing a package of policy options for its June 5 meeting that includes cuts in all its interest rates, Reuters reported last month.

The euro was at $1.3590, down 0.29 percent in New York trade.

Germany's annual inflation rate rose 0.6 percent, far less than the 1.0 percent expected in a Reuters poll and the lowest reading since February 2010. Euro zone inflation data is due out on Tuesday.

"Soft inflation now reinforces the point of view that the ECB will remain dovish and remain ready to ease policy in the future. That's negative for the euro," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.

The euro also fell against sterling to 81.22 pence, with diverging monetary policy outlooks for the ECB and the Bank of England underpinning the pound.

In the United States, the Institute for Supply Management's May manufacturing data came under scrutiny as the originally disappointing reading was later reported to be incorrect. Instead of being well below estimates, CNBC TV said the index was to be corrected to 56 from the originally reported 53.2.

It is unclear what the number will be, though it is expected to be close to the Reuters estimate of 55.5.

The original report, still not officially corrected by the ISM, led to a fall in U.S. Treasury yields as it supported loose U.S. policy. The dollar followed suit, but only temporarily as questions in the market fueled doubt over the report's accuracy.

Earlier, the final reading of the manufacturing Purchasing Managers' Index for the euro zone disappointed, slipping to a six-month low.

The dollar held its advantage on the yen, trading at 102.40 yen, a rise of 0.60 percent on the day. The euro rose 0.28 percent to 139.15 yen.

(Additional reporting by Anirban Nag in London and; Lisa Twaronite in Tokyo; Editing by Louise Ireland, James Dalgleish and Peter Galloway)