FOREX-Stock rally lifts dollar against yen; euro slips

* Dollar rises to 1-month high vs yen as US stocks rebound

* Wall Street jumps on bank rescue hope

* ECB leaves rates unchanged at 2 pct, signals March cut

* BoE cuts rates to record low at 1 percent (Adds comments, updates prices)

By Wanfeng Zhou

NEW YORK, Feb 5 (Reuters) - The U.S. dollar surged to its highest against the yen in nearly a month on Thursday after a rally on Wall Street revived investors' appetite for risk.

The euro fell versus the dollar, weighed down by comments from the European Central Bank chief that the euro zone was undergoing an extended downturn.

The currency market continued to take its cue from U.S. stocks, which rallied amid talk Washington's rescue plan for banks may include suspension of a key accounting rule. That eased demand for the yen, which tends to rise when risk aversion spikes and investors unwind riskier investments.

"We had a lot of (talk) about potentially the SEC relaxing some accounting rules, and that gave the stocks a little bit of a boost. We saw a little bit of a break higher in dollar/yen," said Steven Butler, director of FX trading at Scotia Capital in Toronto.

In late trading in New York, the dollar was 1.9 percent higher at 91.13 yen JPY=. It traded as high as 92.23 yen, the highest since Jan. 8, according to Reuters data.

Analysts said it remains to be seen whether the recovery in risk sentiment will be sustained as investors remained cautious amid concerns about a severe slowdown around the world.

Data on Thursday showed U.S. weekly jobless claims jumped to a 26-year high last week. In a separate report, the government said new orders received by U.S. factories slumped more than expected in December.

Investors will get more clues about the U.S. labor market on Friday when the Labor Department releases its non-farm payrolls numbers for January. The economy probably lost 525,000 jobs last month, a Reuters poll showed.

"The risk ironically for the dollar is a better-than-expected payrolls number," said Omer Esiner, senior market analyst at Ruesch International in Washington.

"We saw slightly better than expected ADP (private sector jobs) report on Wednesday. If the non-farm payrolls data comes in better than 500,000 job losses in January, then I think we could see a further improvement in risk appetite."

EUROPEAN RATE DECISIONS

The ECB on Thursday left interest rates unchanged at 2 percent, as widely expected, but ECB President Jean-Claude Trichet signaled the central bank may resume its monetary easing cycle in March.

He told a news conference that zero interest rates were not something the bank considered "appropriate," a stance that helped limit any euro losses. [ID:nECBNEWS]

The euro was down 0.3 percent at $1.2787 EUR=. It recovered from a session low of $1.2760 as Wall Street advanced.

"Trichet's comments sounded a relatively bearish tone with regard to euro zone growth and left little doubt that lending rates will be cut again next month," Esiner said.

The euro also fell against sterling, which surged after the Bank of England's decision to cut rates by 50 basis points was seen as a proactive move to stimulate growth.

The BoE's rate decision put UK interest rates at 1.0 percent, compared with euro zone rates at 2.0 percent.

The euro was last 1.6 percent lower at 87.42 pence EURGBP=.

"The Bank of England's proactive cuts come in contrast with the ECB's diffidence and this will continue to drive EUR/GBP lower from current levels," Geoffrey Yu, a currency analyst at UBS AG, said in a note. "

Traders said the euro also remained vulnerable to credit woes in Russia and eastern Europe.

Russia said on Thursday it would increase stakes in state banks in coming months. On Wednesday, Fitch downgraded Russia's sovereign ratings, while Kazakhstan's central bank decided to devalue its currency. (Additional reporting by Vivianne Rodrigues; Editing by Kenneth Barry)