* Euro falls on Reuters report ECB considering 2-tier bank charges * Dollar rallies on euro weakness * ECB seen cutting deposit rate by as much as 30 bps next week By Jemima Kelly LONDON, Nov 25 The euro hit a seven-month low against the dollar on Wednesday after Reuters reported the European Central Bank is considering policy options such as whether to stagger charges on banks hoarding cash or to buy more debt. Little over a week before the ECB's next policy meeting, numerous alternatives are open, from snapping up the bonds of towns and regions to introducing a two-tier penalty charge on banks that park money with the ECB, officials said. The single currency, having earlier traded as high as $1.0689 as heightened geopolitical tensions boosted demand for it and the yen, fell by over a cent after the story was published, to $1.05785, its weakest since mid-April. The euro's weakness strengthened the dollar across the board, which rose to an eight-month high of 100.07 against a basket of six major peers. "The way the market is reading it (the Reuters story) is that if the ECB manages to set up some sort of tiering arrangement, it would make it easier to cut rates, because it could set that up as being less penal on the banks," said RBC currency strategist Adam Cole, in London. "So it removes an obstacle to rate cuts and therefore makes them more likely." Stephen Jen, who runs London-based hedge fund SLJ Macro Partners, said he reckoned the ECB would cut the deposit rate by at least 30 basis points next week, to -0.5 percent. The consensus from a Reuters poll issued on Wednesday is that the ECB will cut the deposit rate further to -0.30 percent from -0.20 percent now. Policymakers are discussing the split-level rate - a contested step that would impose a higher charge on banks depending on the amount they deposit with the ECB - in order to soften the impact of any further deposit rate cut on banks. "It's very similar to what the SNB did, it's logical," said Jen. "Draghi said he wanted to accelerate the recovery in inflation - that could not possibly be achieved by cutting the rate by 0.1 percentage points, as the market was expecting." Earlier the yen, traditionally used as a safe haven, hit a 1-1/2 week high against the dollar of 122.26, having gained on Tuesday after the downing of a Russian warplane by Turkey near the Syrian border. "The dollar has been quite negatively correlated with risk aversion...over the last few months," said Credit Agricole currency strategist Valentin Marinov, in London. But as the dollar rallied, the Japanese currency weakened to 122.66 yen, down 0.1 percent on the day. Ahead of the Thanksgiving holiday on Thursday, a run of U.S. economic data will be published later in the day, including durable goods orders, personal consumption, initial jobless claims and house prices. Investors will also be listening to British finance minister George Osborne's plans for spending cuts as he presents his "Autumn Statement" from 1230 GMT, which will also be accompanied by economic forecasts from the Office for Budget Responsbility. (Additional reporting by Ian Chua in Sydney and Hideyuki Sano in Tokyo; Editing by Jeremy Gaunt)

Source