* Dollar rallies to its highest vs euro this year

* ECB downgrades growth view, stoking rate-cut speculation

* Euro zone's Juncker: Euro still effectively overvalued (Adds comments, updates prices, changes byline)

By Vivianne Rodrigues

NEW YORK, Sept 4 (Reuters) - The U.S. dollar rallied on Thursday to its highest against the euro this year after the European Central Bank cut its growth outlook for the 15-nation region, boosting the likelihood of interest rate cuts.

The euro deepened losses after the chairman of euro zone finance ministers, Jean-Claude Juncker, said the zone's single currency was still effectively overvalued despite its recent fall. For details see [ID:nL4400641] and [ID:nBRM000070].

Euro zone economic uncertainty was "particularly high," ECB president Jean-Claude Trichet said after the bank left its benchmark lending rate at 4.25 percent on Thursday. But he cautioned inflation remains high and risks are to the upside. [ID:nL4102376].

"Trichet maintained his unambiguously hawkish language on inflation, but markets are largely focusing on the ECB's growth downgrades for the euro zone," said Ashraf Laidi, chief FX strategist at CMC Markets U.S. in New York. "This bolsters the possibility of an eventual ECB easing in the second half of 2009."

The ECB staff now forecasts growth in the euro zone for 2008 at between 1.1 and 1.7 percent. For 2009 it forecasts growth between 0.6 percent and 1.8 percent.