(Recasts, adds quote, changes byline and dateline. PVS TOKYO)
By Jamie McGeever
LONDON, Oct 25 (Reuters) - The dollar steadied against major currencies on Thursday, with climbing equities helping calm a market awaiting data expected to bolster a widely-held view that a slowing U.S. economy will herald lower interest rates.
Investors will look to U.S. new home sales, durable goods orders and weekly jobless claims to gauge how deep the malaise from a crumbling housing market and tight credit conditions is.
The euro showed little reaction to another fall in the monthly Ifo index of German business sentiment in October. The Ifo fell to its lowest in over 18 months but was not as weak as analysts had expected.
The euro was within a cent of its lifetime high just shy of $1.4350 and the dollar close to its record low of 77.093 on an index basis struck on Monday.
Sentiment toward the U.S. economy soured further on Wednesday after Merrill Lynch reported a (MER.N: Quote, Profile, Research) $7.9 billion write-down and huge third quarter loss, and existing home sales slumped to a record low in September.
This cemented expectations the Federal Reserve will cut its fed funds rate next week. Speculation circulated the Fed may even cut its discount rate to banks before that, fuelling a late Wall Street rally and lifting European shares on Thursday.
"There's a lot of data out over the course of the day that will give you a broader assessment of how the U.S. economy is faring," said Kamal Sharma, currency strategist at Bank of America.
"But the morning session has been dominated by the more positive backdrop to the equity market."
At 0815 GMT, the dollar index, a measure of the greenback's value against a basket of six currencies, was little changed at 77.51 (.DXY: Quote, Profile, Research).
CARRY TRADE BACK ON?
The euro was little changed at $1.4263, close to its all-time high around $1.4348 set on Monday <EUR=>.
The dollar was up 0.2 percent against the yen at 114.31 yen <JPY=>, as was the euro at 163.10 yen <EURJPY=>.
Sterling was little changed at $2.0485 <GBP=> and dollar/Swiss was also broadly flat at 1.1710 francs <CHF=>.
The Munich-based Ifo economic research institute said its business climate index, based on a monthly poll of around 7,000 firms, registered 103.9 after 104.2 in September. For more, click on link [nL24784249].
The major European stock indices were up around 1 percent on after the data, while Bunds extended earlier losses to trade at session lows.
In general, equity market strength is conducive for so-called carry trades, where investors sell low-yielding currencies like the yen for higher returning assets.
"Yen carry trades should pick up when the market starts to calm down, said Mitsuru Sahara, senior vice president of forex dealing at Mitsubishi UFJ Bank.
"This should put the yen back under selling pressure, perhaps not so much against the dollar, but certainly against the Australian and New Zealand currencies."
Attention now shifts to the U.S. economic data later in the day.
New home sales data at 1400 GMT are expected to show another fall in September, durable goods orders in September are expected to have rebounded from August's steep decline, while jobless claims are seen falling from the surprisingly sharp jump the previous week.