* Euro pares multi-week gains vs dlr as Europe shares fall
* Euro up 0.1 pct at $1.2980 <EUR=>
* Eyes on German ZEW index; sentiment seen deteriorating
* Nervousness ahead of FOMC keeps trade subdued
(Recasts, changes dateline prvs TOKYO)
By Tamawa Desai
LONDON, March 17 (Reuters) - The euro pared gains against the dollar on Tuesday as European share prices fell, prompting investors to pull back a bit from perceived riskier assets.
Traders were also wary of chasing prices higher ahead of key German economic data and U.S. and Japanese central bank policy-setting meetings which both end on Wednesday.
The single currency had hit an 11-week high against the yen and a five-week high against the dollar on Monday after equity prices soared.
European share prices were down 1.3 percent in early trade .FTEU3 after Tokyo's Nikkei average gained some 3 percent.
"There is some pressure on the upside for euro/dollar," as European equities lost ground, said Ian Stannard, senior currency strategist at BNP Paribas.
The euro was up 0.1 percent on the day at $1.2980 but off from a high of $1.3032 hit earlier in the session as share prices weighed, and below Monday's peak of $1.3072, which was the highest since Feb. 10.
The euro rose 0.5 percent to 127.94 yen <EURJPY=R>, off from the previous day's peak of 128.74 yen, which was the highest since late December.
Markets will closely watch German ZEW institute's economic sentiment index, which is expected to have deteriorated to -7.4 in March from -5.8 the previous month. The data will be released at 1000 GMT.
"Deterioration in the German ZEW survey is the main event risk," said analysts at RBC Capital Markets in a note, adding that failure by the euro to sustain a key technical resistance level of $1.3060 area could push the pair lower to around $1.2830/35.
The policy-setting U.S. Federal Open Market Committee will kick off its meeting later on Tuesday. With rates already near zero, the focus is on whether the central bank will expand its balance sheet further.
There is speculation that the Fed may decide to purchase long-dated Treasuries, but "market players may prove to be disappointed," said BNP's Stannard.
The dollar rose 0.4 percent against the yen to 98.58 yen <JPY=>.
The Bank of Japan is seen keeping interest rates unchanged at 0.10 percent but could increase its outright buying of government bonds and purchase subordinated debt issued by banks to help shore up their balance sheets. (Editing by Mike Peacock)