* Euro suffers fresh setback after German business activity data
* Talk of ECB rate cut keeping lid on the euro
* AUD off lows, eyes on CPI data
By Ian Chua
SYDNEY, April 24 (Reuters) - The euro languished at two-week lows in early Asian trade on Wednesday, having suffered a setback after disappointing economic news out of Germany fuelled talk of an interest rate cut by the European Central Bank.
The common currency fell more than 0.5 percent to $1.2973 in light of a survey showing a sharp drop in German business activity in April. It has shed 1.5 percent since hitting a high around $1.3200 last week.
But solid support at the session low, which also corresponds to the 50 percent retracement level of its April 4-16 rally, helped steady the euro. It last traded at $1.3002.
German business morale for April due later on Wednesday is the market's next focus.
Despite the data, Europe's main share index posted its biggest one-day gain in more than seven months, while Spain sold 3-month bills at the lowest yield on record at an auction, suggesting there was no widespread market panic.
Still, some analysts doubted the conservative ECB would embark on a much more aggressive easing beyond a simple cut in the refi rate.
"We thus view dips to the 1.2750-1.2800 area as a potential buying opportunity and see the combination of a lack of more aggressive ECB action, such as negative rates or QE, and declining euro bond market stress leading to an eventual EUR/USD bounce," said Vassili Serebriakov, strategist at BNP Paribas.
Against the yen, the euro dipped to 127.87 before recovering to 129.25. The dollar also survived a fall to 98.48 yen before popping back up to 99.42, with investors still eyeing an eventual break of the 100 barrier.
Choppy overnight trade was made worse by a tweet, quickly shot down as bogus, about explosions at the White House. It was later revealed that hackers took control of the Associated Press Twitter account and sent the false tweet.
Most of the surveys on Tuesday showed major economies in North America, Europe and Asia lost some momentum this month, a development that may see central banks intensify efforts to revive a flagging global recovery.
Yet there was no renewed selling pressure on risk assets, perhaps as investors began to anticipate yet more quantitative easing from the world's major central banks. That helped the Australian dollar bounce back to $1.0262 from a six-week low of $1.0221 plumbed on Tuesday.
The Aussie's immediate focus is consumer inflation data due at 0130 GMT. Forecasts is for annual underlying inflation to stay benign at around 2.4 percent, allowing the Reserve Bank of Australia to maintain its easing bias.
The kiwi was also better bid, and found further support after the Reserve Bank of New Zealand gave a relatively upbeat assessment on the economy.
As expected the RBNZ left interest rates at a record low 2.5 percent and said they would stay there for the rest of the year.
The kiwi gained about 40 pips on the back of the RBNZ comments and was last at $0.8436, off a three-week low of $0.8360 plumbed Tuesday.