By Gertrude Chavez-Dreyfuss NEW YORK, May 16 (Reuters) - The euro rose from seven-week lows on Monday, boosted by Asian central bank buying after last week's sharp sell-off, but gains were seen limited as doubts grew a European Union meeting would offer clarity on euro zone debt aid. The single euro zone currency also benefited from comments by German Chancellor Angela Merkel, who seemed to have ruled out debt restructuring for Greece, saying, saying doing so would be "incredibly damaging" to the euro zone's credibility. See [ID:nBAT006249]. Overall, the market's mood remained cautious. The arrest of International Monetary Fund chief Dominique Strauss-Kahn on sexual assault charges added to the uncertainty and sparked speculation the expected vacancy at the top IMF post may cloud the outlook for euro zone assistance. Market players said euro sentiment could remain bearish as meaningful progress on resolving the Greek crisis was unlikely at Monday's meeting. Athens is struggling to put its public finances in order under an EU/IMF bailout program. "There is clear support in the euro versus the dollar at $1.41 after having been sold off so much over the last week and a half so there's a lot of bargain hunting here," said Boris Schlossberg, director of FX research at GFT in New York. "But I don't know how firm the support is." He added that the Strauss-Kahn situation has "thrown the market for a loop," as he has been instrumental in negotiating the bailout deals for debt-ridden euro zone countries. "So there is some vacuum of leadership at the IMF and also creates political turmoil in France," Schlossberg said. Strauss-Kahn had been due to join euro zone finance ministers on Monday to discuss the bloc's debt crisis and how to handle Greece, which is struggling to meet the terms of a 110 billion-euro EU/IMF bailout granted last year. The euro rose as high as $1.41735 EUR=EBS on trading platform EBS and was last at $1.4165, up 0.4 percent. Earlier, it fell to $1.40481, the lowest since late March. Traders said the euro's earlier fall was met with strong demand from Asian sovereign accounts who were still keen to buy it on dips, while strong bids were seen toward $1.40. The euro has fallen roughly 6 percent from a 17-month peak of $1.4940 hit less than two weeks ago as peripheral debt concerns resurfaced, but $1.40 seemed to be a key support level. It represents the euro's 200-week moving average, while the 100-day moving average lies at $1.3922. Below that is the 50 percent retracement of the euro's Jan-May rally, near $1.3900. Camilla Sutton, chief FX strategist at Scotia Capital in Toronto said despite the slight pick-up in the single euro zone currency, the market's bias remained selling euros for now. The Strauss-Kahn news also weighed on risk sentiment, prompting short-covering demand for the U.S. dollar at the expense of high-yielding currencies including the Australian, Canadian and New Zealand dollars. Equity and commodity markets also took a hit, which analysts said was helping to support the dollar. "The peripheral euro zone problems continue to be somewhat of an albatross for the euro and they will keep the euro bulls at bay," said Paul Mackel, director of FX strategy at HSBC. "These problems have been there all along but recently they've put more of a risk premium into the euro than was the case a few months ago." A further headwind for the euro was U.S. data showing speculators still holding hefty long positions even after trimming them and other higher-yielding currencies such as the Australian dollar last week. That suggests chances of more liquidation of euro long positions. [IMM/FX] Meanwhile, the greenback's index against a basket of six major currencies hit a six-week high of 76.001 .DXY. earlier, but was last down 0.3 percent at 75.573.

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