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

* Euro gains limited ahead of ECB rate decision

* Eyes on U.S. December retail sales figures later in the day

By Kaori Kaneko

TOKYO, Jan 14 (Reuters) - The dollar edged down from a one-month high against the euro on Wednesday but remained underpinned as investors braced for a possible interest rate cut by the European Central Bank later in the week.

The ECB is expected to cut rates by 50 basis points from the current 2.5 percent at a policy meeting on Thursday to help fight a broad economic downturn. [ECB/INT]

The European single currency's gains against the dollar were also limited due to the recent threat of ratings downgrades for some euro zone countries.

Spain on Monday became the third euro zone country since last week to be warned by ratings agency Standard & Poor's that its credit rating is under threat from the global credit crisis. [ID:nLC477283]

"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.