FOREX-Less-aggressive ECB lifts euro to one-month high

* ECB cuts rates, announces asset purchases

* Euro gains as ECB seen as less aggressive than Fed

* Focus turns to upcoming U.S. bank stress tests (Recasts, updates prices, adds comments, changes byline)

By Wanfeng Zhou

NEW YORK, May 7 (Reuters) - The euro rose to a one-month high against the dollar on Thursday as traders said the European Central Bank's decision to buy covered bonds was not as aggressive as those taken by other major central banks.

The ECB said it plans to spend about 60 billion euros ($80 billion) buying covered bank bonds in a bid to stem the euro zone's economic decline. The ECB also cut its interest rates to 1 percent, a record low. For more, see [ID:nL7375413].

Recent aggressive measures by other central banks, including the U.S. Federal Reserve, to flood the financial system with liquidity has put near-term pressure on their currencies.

"I think the ECB announcement has allowed the euro to gain a bit of ground," said Daniel Katzive, global director of foreign exchange at Credit Suisse in New York. "The ECB has adopted a pretty limited form of credit easing -- arguably quantitative easing, depending on your definition -- but certainly not the wholesale quantitative easing that we've seen in the U.S. and UK.

"Their monetary policy is tighter and the currency is stronger as a result," he added.

In afternoon trading in New York, the euro rose 0.3 percent to $1.3357 EUR=, off a $1.3470 session peak, its highest level since April 6 and its approximate 200-day moving average, according to Reuters data.

The euro was up 1 percent at 132.25 yen EURJPY= while the dollar rose 0.6 percent to 98.99 yen JPY=.

Growing optimism that special policies by central banks have helped steer the world economy through the worst of the recession also helped boost investor risk appetite and lend support to the euro, some analysts said.

"The ECB looks much better today than they have for several years," said Benedikt Germanier, senior currency strategist at UBS in Stamford, Connecticut. "This shows the market they are acting, and it will be helpful. It's positive news."

Sterling fell after the Bank of England kept interest rates steady but increased the size of its asset purchase program.

Sterling last traded down 1 percent at $1.4970 GBP=, while the euro rose 1.3 percent to 89.18 pence EURGBP=.

STRESS TEST RESULTS

Currency investors also awaited the official results of 19 U.S. banks' stress tests at 5 p.m. EDT (2100 GMT). U.S. Treasury Secretary Timothy Geithner said Wednesday none of the 19 banks being examined are at risk of insolvency, although reports suggest many, including some of the biggest, need more capital. [ID:nN06300175] [ID:nL6943131]

Analysts said they did not expect massive currency reaction because leaks earlier this week mean few expect surprises.

"Trading ranges have been compressed considering we're waiting for the results of the stress tests," said Jessica Hoversen, a fixed-income and currency analyst at MF Global in Chicago.

"Of the big banks -- who needs capital and who doesn't -- we know that already, but I think there's a big question on what else is there," she said.

In other currency trading, the Australian dollar hit seven-month peaks against the yen AUDJPY=D4 and dollar AUD= after data showed surprise gains in Australian employment, casting doubt on the need for further rate cuts. [ID:nSYD389866]

Against the U.S. dollar, the Australian dollar rose 0.8 percent to $0.7525, while the New Zealand dollar jumped 1.4 percent to $0.5912 NZD=. (Additional reporting by Steven C. Johnson; Editing by Dan Grebler)