* Sterling slips vs euro, but stays near 11-mth high * Euro supported, strong US data boosts risk appetite * Analysts: Euro's short-covering gains seen short-lived LONDON, Dec 23 (Reuters) - Sterling paused its rally against the euro on Friday as better risk appetite prompted investors to trim bets to sell the single currency, but analysts expected the pound to resume its climb if pessimism about the euro zone debt crisis resurfaced. The UK currency was supported versus the dollar as data the previous day showing an improving U.S. economy prompted investors to pick up currencies considered to be higher risk. Market participants said movements in sterling were extremely quiet due to a holiday-shortened trading day. UK markets will close at 1230 GMT. Analysts said the pound would track moves in the euro versus the dollar, adding that the single currency had room to inch higher if investors continue to trim their short positions heading into the year-end. The euro inched up 0.1 percent on the day to 83.30 pence, but hovered near an 11-month low of 83.02 pence hit earlier in the week. Many analysts believe further gains in the single currency will be limited, and that more indications that European policymakers are still struggling to solve the euro zone debt crisis will push the single currency towards 80 pence. "We know the speculative end of the market is short of the euro and that everyone is bearish on the euro. If you shake those positions out into Christmas and new year, you'll get a move higher in the euro versus the dollar and sterling," said Kit Juckes, currency strategist at Societe Generale. But he added: "If euro/sterling moves up on a bit of short covering into the new year, I think that's just a short-term move," and said the pair would eventually fall towards 80 pence in the coming months. Sterling rose 0.2 percent to $1.5697, hovering above support at $1.5650. "Buyers (are) responding to resistance in the high-$1.57s, but below $1.5650 is needed to show their initiative and pencil in a $1.5580 test," SEB analysts said in a note. The $1.5650 level roughly referred to lows hit on two occasions this week. The pound traded at 81.6 versus a currency basket. On Thursday, trade-weighted sterling hit a 10-month high of 81.70. As debt problems in the euro zone deteriorate, sterling has benefited versus the euro from perceived safety flows into UK gilts. But concerns over the fragility of the British economy are seen lasting well into 2012 with BoE policymakers leaving the door open for more quantitative easing in February, which could pose a negative risk to the UK currency. Signs of a struggling economy were apparent in data on Thursday, when the Office for National Statistics revised third-quarter GDP growth up to 0.6 percent on the quarter from 0.5 percent, but left the annual rate of growth unrevised at 0.5 percent.

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