* Euro rises as German industry orders jump
* Investors wary of pushing euro lower before ECB meets
* U.S. Fed's Williams urges caution on trimming stimulus
NEW YORK, Nov 6 (Reuters) - The euro climbed broadly onWednesday after stronger-than-expected German industry ordersaffirmed expectations the European Central Bank will not cutinterest rates this week despite a steep fall in inflation.
Even so, the outlook for the euro zone's common currency hasdimmed, with many market participants expecting the ECB tostrike a dovish tone at Thursday's monetary policy meeting.
The euro has dropped sharply from levels above $1.38 touchedbefore last week's data on inflation for the euro zone, whichfell to the lowest level in nearly four years. The inflationnumbers have fanned speculation the ECB may further easemonetary policy at some point, although Wednesday's robustGerman industry orders cemented views that the ECB will keepinterest rates unchanged on Thursday.
Only one of 23 money market traders polled by Reutersexpects a cut on Thursday.
"Our base case is that the ECB will strike a far more dovishtone on Thursday, laying the foundation for an interest rate cutand LTRO (long-term refinancing operation) at the Dec. 5thmeeting," said Camilla Sutton, chief currency strategist atScotiaBank in Toronto.
She said the risk of an ECB rate cut is real whether itcomes in November or December, adding that the ECB will workhard to soften the euro and its impact on inflation. ScotiaBanksees the euro at $1.31 by the end of the year.
The euro extended gains after data showed German factoryorders jumped by 3.3 percent in September, well above the 0.5percent economists had expected.
In late afternoon trading, the euro was up 0.4 percent at$1.3523, well above Monday's low of $1.3441.
Ruben Segura-Cayuela, European economist at Bank of AmericaMerrill Lynch in London, said the euro is not overvalued but isclose to the upper end of its equilibrium range. He said theeuro zone cannot afford a stronger euro.
"The strength of the euro this year has already startedoffsetting the periphery's competitiveness gains, which theregion achieved during a painful adjustment in recent years,"Segura-Cayuela said.
The euro has gained 2.5 percent so far this year, on trackfor its strongest yearly performance since 2007.
Another report on Wednesday showed that euro zone privatesector growth slowed less in October than previously estimated.
FED'S WILLIAMS' COMMENTS PRESSURE DOLLAR
The euro was also helped by comments from the president ofthe San Francisco Federal Reserve Bank, John Williams, who saidlate on Tuesday that the Fed should wait for stronger evidenceof growth momentum before trimming bond-buying. The remarks weighed on the dollar.
But a report on Tuesday showing U.S. service-sector activitypicked up in October suggested the economy may not have sufferedbadly from the partial U.S. government shutdown, and kept alivethe prospect of the Fed scaling back stimulus in coming months.
Carl Hammer, chief currency strategist at SEB, said heexpected euro/dollar movements to be limited to within 1 or 2cents either side of $1.35.
"An ECB rate cut would be negative for the euro because itwould play into the hands of short-term speculators as themarket is quite long of euros, but it would not really alter thelong-term picture," Hammer said, adding that a cut would havelimited effect because rates are already near zero.
The euro was up 0.6 percent against the yen whilethe dollar gained 0.2 percent against the Japanese currency.
Sterling earlier hit a one-week high against thedollar and a one-month peak against the euro afterstronger-than-expected industrial output data.
"The outlook for the UK economy has improved notablyfollowing a string of better-than-expected economic releases,"said Eric Viloria, senior currency strategist at Forex.com."However, as expectations increase it tends to be more difficultfor positive surprises to continue."
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