LONDON (AFP) — The euro rallied from two-year low points against the dollar on Tuesday on the eve of a US interest rate call, as rebounding stock markets turned investors away from the US currency, dealers said. The euro rebounded after briefly hitting 1.2328 dollars, its lowest since April 2006. In morning London trade, the single currency advanced to 1.2490 dollars, compared with 1.2471 late in New York on Monday. The yen meanwhile eased back from multi-year high points against the euro and the dollar, providing some welcome respite for Japanese exporters who are feeling the pain of a strong currency. Global stock markets rallied on Tuesday after days of heavy losses as investors hunted for bargains despite continued worries about the ailing global economy. "There's mounting speculation that the massive equity sell-off may be coming to an end -- a consensus that is being driven by a degree of stability emerging in Asian markets -- and with this, there is a move to start pulling some funds out of dollars," said CMC Markets analyst James Hughes. "As a result the greenback is retreating from recent highs but it is worth cautioning that this could easily be reversed if confidence in stocks wanes again." The Federal Reserve opens a two-day meeting on Tuesday widely expected to cut key interest rates further as part of an unrelenting effort by the central bank to restore confidence to battered markets. The US central bank, which led a coordinated global rate cut earlier this month that pushed its target rate down a half-point to 1.50 percent, is seen as trimming the rate another 25 to 50 basis points. Against the Japanese currency on Tuesday, the dollar rose to 94.67 yen from 92.76 yen. The yen -- which has soared in recent weeks as people dump risky investments -- dropped below 95 to the dollar and 120 against the euro as the Tokyo stock market staged a strong rally. Traders were watching nervously to see whether Japanese authorities would step into the market to sell the yen, after the Group of Seven rich nations' club fired a warning shot to the market over the currency's recent surge. The soaring yen has triggered alarm bells in Japan, which is already on the brink of recession. Last week the dollar fell to the upper 90-yen level for the first time since August 1995, while the euro hit a six-year low below 114 yen. In a rare move, the G7 on Monday singled out the yen in a joint statement, voicing concern about its "excessive volatility" and its "possible adverse implications for economic and financial stability." In London morning trading on Tuesday, the euro changed hands at 1.2490 dollars against 1.2471 late Monday, at 118.20 yen (115.72), 0.8005 pounds (0.8016) and 1.4525 Swiss francs (1.4416). The dollar stood at 94.67 yen (92.76) and 1.1635 Swiss francs (1.1559). The pound was at 1.5598 dollars (1.5551). On the London Bullion Market, the price of gold rose to 744.90 dollars an ounce from 730.50 dollars late on Monday.

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