The euro clawed back from one-month lows against the dollar on Wednesday on short-covering as equity prices recovered, but the upside was capped before the European Central Bank's policy-setting meeting later this week. A rebound in Asian share prices after Wall Street pared most intraday losses prompted investors to buy back the euro after sharp selling in equities spurred them to shun riskier assets the previous day and seek perceived safer currencies such as the dollar and yen. "There's been a bit of a squeeze and it's a reversal from what we saw yesterday with a slight emergence of risk appetite," said Christian Lawrence, currency strategist at RBC Capital Markets. "It's still about equity markets," he added, saying moves will likely be subdued ahead of the ECB's decision on Thursday. The ECB is widely expected to cut rates by 50 basis points from the current 2.5 percent to help fight a broad economic downturn. [ECB/INT] At 0834 GMT, the euro was up 0.7 percent on the day at $1.3291 after hitting a session high of $1.3335 . It had fallen to a one-month low of $1.3140 on trading platform EBS the previous day. Against the yen, the single currency rose 1.4 percent to 119.29 yen . It had hit a low of 117.13 yen on EBS on Tuesday, the lowest since early December. European shares opened higher .FTEU3 after Tokyo's Nikkei share average .N225 rose 0.3 percent after a sharp sell-off the previous day. [.T] Data on Wednesday showed German 2008 GDP rose 1.3 percent from the previous year, in line with market forecasts for a 1.4 percent gain. [nBAE001547] Traders will keep an eye on euro zone industrial production data due out at 1000 GMT, which is expected to show a 1.5 percent decline in November from the previous month.

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