LONDON (Reuters) - The euro rose to a seven-week high against the dollar on Thursday after Federal Reserve minutes hinted at more monetary easing in the United States while the key figures in French and German business activity surveys were not as bad as feared. The Fed minutes showed the U.S. central bank may opt for more stimulus "fairly soon". But the dollar pared some of its losses after St. Louis Federal Reserve President James Bullard told CNBC that data since the last policymakers' meeting had been somewhat better and that the minutes were "a bit stale". The euro was last up 0.2 percent on the day at $1.2550. It was off an earlier high of $1.25726, its strongest since July 4, when it stalled ahead of chart resistance at $1.2685 and a reported options barrier at $1.2600. Analysts saw scope for further gains for the euro in the near term due to expectations the European Central Bank will act to lower Spanish and Italian bond yields next month. "There is a lot of momentum, people are still short of the euro and you have both sides of the equation, the Europe side and the U.S. side, coming together," said Audrey Childe-Freeman, head of foreign exchange strategy at BMO Capital Markets in London. "Another round of Fed QE (quantitative easing) was something many people were talking about but not many were believing. If you look at previous times the Fed has done QE it is undeniably bearish for the dollar." She said if Federal Reserve chairman Ben Bernanke confirms more QE is possible when he speaks at Jackson Hole later this month and if there are no "nasty negative shocks" from Europe, the euro could rise to $1.2760 (the 50 percent retracement of the March to July sell-off) next month. But while some market players expect the Fed's likely easing to come in the form of a third round of bond buying, known as "QE3", others caution it may extend the period it plans to keep exceptionally low rates in place instead. The Fed has pledged to keep low rates through late 2014. The euro's gains pushed the dollar index to its lowest in two months to 81.284 . It was last down 0.1 percent at 81.422. The dollar also fell to a seven-week low against the Swiss franc. The U.S. dollar was subdued against the yen after making its biggest one-day loss in nearly two months on Wednesday after the Fed minutes. The dollar fell to 78.273 yen on Wednesday, its weakest in over a week, and last traded at 78.62 yen. FRAGILE EURO ZONE The euro was lifted by mostly better-than-expected French and German purchasing managers' surveys, although market participants were wary that the outlook for the euro zone economy remains fragile. "The French PMIs were a bit better while the German one was at best mixed," said George Saravelos, currency strategist at Deutsche Bank. "Still, at the margins they are supportive and we expect the euro has a bit more to go towards $1.27. Markets are also starting to put a bit more risk premium on the Fed." Data on Thursday showed a long-running contraction in French business activity eased in August, while the index tracking Germany's manufacturing sector rose in August, though it contracted for the sixth straight month. Figures for the euro zone as a whole still pointed to recession, however. This week, a series of high profile meetings may help frame the next phase of ECB policymakers' response to the debt crisis. German Chancellor Angela Merkel and French President Francois Hollande meet later on Thursday to calibrate their message to Greek Prime Minister Antonis Samaras. Merkel said on Wednesday no decisions would be taken during her talks with Samaras on Friday and that she would wait for the lenders' report on Greek progress in meeting targets, which is not expected until at least late September.

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