By Naomi Tajitsu

LONDON (Reuters) - The dollar rose on Monday, closing in on a two-month high against a basket of currencies as a slight rise in risk appetite and growing speculation that cuts to U.S. interest rates may soon end boosted the U.S. currency.

Weak economic data suggesting that Australia and New Zealand may be heading for rate cuts pushed down the high-yielding currencies of both countries, as lower rates would trim their rate advantage against other currencies including the dollar.

Market liquidity was thin however, with many European markets closed for holidays, and analysts said that this may aggravate currency moves.

News that a major earthquake had shaken parts of China had limited initial impact on the currency market as investors awaited more news of damage. Click on

The dollar has climbed in recent weeks on brewing speculation that the Federal Reserve may be nearing the end of its rate-cutting cycle, having slashed them by a total of 3.25 percentage points since September to 2 percent.

Yet analysts said that while risk appetite has picked up, many investors remain cautious about the health of the global economy and financial systems, which may cap additional gains in the U.S. currency, at least in the near term.

"We might see some consolidation in the dollar, the market's a bit jittery about credit problems and concerns for a slowdown," said Geoffrey Yu, currency strategist at UBS in Zurich.

The euro traded 0.5 percent lower at $1.5405, hovering within range of a two-month low of $1.5284 hit last week.

Against a basket of currencies, the dollar rose 0.4 percent to 73.428, pushing towards 73.895 touched last week for the first time since early March.

The dollar rose more than 0.8 percent to a session high of 103.80 yen, much of the gain having been nade before news of China's earthquake.

AUSSIE, KIWI SUFFER

The Australian dollar was down 0.4 percent at $0.9385, while the New Zealand currency slipped roughly 0.6 percent to $0.7645 , near a four-month low hit earlier in the day.

Antipodean currencies suffered after a survey showed business confidence in Australia hitting the lowest since September 2001 and housing finance falling sharply, while a report in New Zealand showed housing price gains slowing for an eighth straight month and projected to fall.

In the case of New Zealand, the country's central bank is now seen slashing rates by up to 125 basis points over the next year and thereby eroding the allure of the New Zealand dollar's 8.25 percent rate -- the highest among industrialised economies.

But while analysts said there were many reasons for a fall in the kiwi, the case for a slide in the Australian dollar was not so clear-cut as the country's labour market is robust and high commodity prices provide an economic boon.

"It may be the beginning of a downtrend for the Aussie but I'm not convinced the Aussie will collapse from here," said Masafumi Yamamoto, head of FX strategy for Japan at Royal Bank of Scotland.

After the dollar tumbled following the Federal Reserve's aggressive interest rate cuts and efforts to pump cash into locked-up money markets, the Fed is now seen on hold and expectations are mounting for other central banks to cut rates.

Analysts said that a series of speeches by Fed officials due this week would be scrutinised for more clues into whether the end for aggressive rate cuts was near.

"If they come out hawkish it could be a sign that Fed cuts are down for the short term ... and this would support the dollar," said Yu at UBS.

At the same time, mounting signs that European growth is stumbling has stirred speculation the European Central Bank could tiptoe towards trimming rates.

A string of poor economic data in the euro zone, along with the outlook for the Fed to keep rates steady, drove the dollar's rebound to two-month highs against the euro and a basket of major currencies last week.