FOREX-Euro rises vs dollar but gains limted before ECB

* Euro recovers from 1-mth low vs dollar on short-covering

* Euro remains under pressure before ECB rate decision

By Kaori Kaneko

TOKYO, Jan 14 (Reuters) - The euro recovered from a one-month low against the dollar on Wednesday but remained under downward pressure as investors braced for a European Central Bank rate cut this week.

The single currency's gains were also limited due to the recent threat of ratings downgrades for some euro-zone countries, with much of the day's recovery merely due to short-covering, traders said.

"The surrounding environment for the euro is weak and there are no reasons to favour the currency," said Nobuaki Kubo, vice president at BBH Investment Services.

Markets expect the ECB to cut interest rates on Thursday by 50 basis points from the current 2.5 percent, to help fight the economic downturn. [ECB/INT]

If the ECB doesn't take drastic easing steps, the euro could be hurt further on a view that the central bank is falling behind in helping the faltering economy, Kubo added.

The euro rose 0.6 percent to $1.3264 EUR= from late New York trade, after hitting a one-month low of $1.3140 on trading platform EBS in U.S. trading.

Against the yen, the single currency gained 0.6 percent to 118.70 yen EURJPY=R. It had fallen as low as 117.13 yen on EBS in U.S. trading, the lowest since early December.

The dollar was up 0.2 percent against the yen at 89.55 yen JPY=, helped by demand around the midmorning rate fixing.

Demand for the greenback firmed on Wednesday after a government report showed the U.S. trade gap shrank by the most in 12 years in November, driven by a plunge in imports. [ID:nN13386136] (Reporting by Kaori Kaneko; Editing by Chris Gallagher)