* Euro boosted by upbeat German Ifo survey * Trade likely to be cautious ahead of French vote on Sunday * Sterling rises to 5-mth high vs dollar By Nia Williams LONDON, April 20 (Reuters) - The euro edged higher on Friday after a better-than-expected German business sentiment survey, but gains looked capped by concerns over Spain's finances and uncertainty before the first round of French presidential elections on Sunday. Spanish 10-year government bond yields flirted with the 6 percent level after a debt auction on Thursday fell short of market expectations, helping keep the euro hemmed firmly within its recent trading range between $1.30 and $1.32. The common currency was up 0.4 percent at $1.3190, having hit a session high of $1.32066, just shy of its 55-day moving average of $1.3207. Traders cited sizeable options expiries around $1.32 that were likely to check gains. Germany's Ifo business climate index rose to 109.9 in April versus a forecast of 109.5, in the latest sign the euro zone's largest economy continued to outpace the bloc's debt-ravaged southern states and highlighting the divergences within the currency bloc. "The Ifo surprised once again to the upside so we gained a bit of intra-day volatility but the wider ranges are still very tight," said Chris Walker, currency strategist at UBS. "Spanish yields are back close to 6 percent and that's clearly the focus of the markets in the longer term. The euro could break below $1.30 if there is a big escalation in Spanish yields or if French bonds take off." Concerns about Spain's deficit, banking sector and poor growth outlook have mounted in recent days, raising the possibility that Spanish yields could rise to 7 percent, an area many see as a tipping point into unaffordable borrowing costs. A firm break below $1.30 would eventually open the door to a test of the euro's 2012 low at $1.2624. Most analysts expect the euro to remain rangebound ahead of Sunday's first round of the French vote, but financial markets are nervous that the expected eventual winner, Socialist Francois Hollande, may have a looser grip on government finances than current President Nicolas Sarkozy. The second round of the French election takes place on May 6, the same day as a Greek election and before an Irish referendum on the fiscal compact on May 31, leaving the euro vulnerable to a clutch of political risks. "There's plenty ahead to keep investors on edge and notwithstanding the recent stability in euro/dollar, we still see a breach of the $1.3000 level over the coming weeks," said Derek Halpenny, European Head of Global Currency Research at Bank of Tokyo Mitsubishi, London. FIREWALL BOOST EXPECTED Investors are also watching how policymakers at this weekend's IMF-World Bank meeting address the vexed issue of more funds to cushion vulnerable economies from the euro zone crisis. The International Monetary Fund is expected to announce how much extra it has raised. Its managing director Christine Lagarde wants at least $400 billion in extra funds and so far $320 billion has been pledged from Europe and Japan. "If it were to go beyond the $400 billion soft target and approach the original $500 billion target, then the euro could gap higher on the Sunday open," Citibank analyst Greg Anderson said in a note. But if total fundraising fails to go beyond the $320 billion already announced, the euro could start lower, he added. Nevertheless, weaker-than-expected U.S. data on Thursday and expectations of further monetary easing from the Bank of Japan next week has left many investors reluctant to sell the euro aggressively against the dollar or yen. The yen hovered close to its lowest levels in 10 days against the dollar after Governor Masaaki Shirakawa said the BoJ would continue powerful monetary easing until a 1 percent inflation target is in sight. His words reinforced expectations the BoJ will ease policy further at its April 27 meeting. The dollar stood at 81.77 yen, bringing its April 10 peak of 81.87 yen into focus. The euro hit a two-week high of 107.962 yen, up 0.5 percent on the day and staging a strong comeback from Monday's trough of 104.63 yen. Sterling hit a 5-month high against the dollar of $1.6122 after strong UK retail sales data doused any faint expectations of more monetary stimulus by the Bank of England.

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