* Euro up as markets bet on earlier ECB rate hike
* Dollar struggles, index hits lowest since Nov
* Aussie at 4-wk high vs dollar, sterling at 2-1/2 mth high
(Adds comments, updates prices)
By Naomi Tajitsu
LONDON, Feb 1 (Reuters) - The euro rallied to its highest against the dollar in more than two months on Tuesday, boosted by signs that increasing inflation pressures will prompt a much faster rise in euro zone than U.S. interest rates.
The Australian dollar also hit a four-week high against the dollar, buoyed by upbeat central bank comments, while strong UK data lifted sterling to a 2-1/2 month maximum, driving the U.S. currency to its lowest since early November against a basket of currencies.
Traders said demand from Middle Eastern investors helped lift the euro, while Asian sovereigns were also seen buying back euro positions sold earlier in the day, as well as buying Australian dollars.
Investors now widely expect the Federal Reserve to lag far behind other central banks -- notably the European Central Bank and the Bank of England -- in raising interest rates.
"Major currencies are ganging up on the dollar at the moment. The euro, Aussie and sterling all have their own independent reasons for rising which are all anchored to signs of stronger growth," said Gavin Friend, currency strategist at nabCapital.
"The question now is whether euro/dollar can make a break above the $1.37/1.38 area and establish some support there".
The euro rose as high as $1.3776, its strongest since late November, before edging back to $1.3737, up 0.4 percent on the day.
Some easing in concern over political unrest in Egypt helped the single currency as did a fall in Germany's jobless rate and strong final readings of purchasing managers' surveys, supporting the view the overall euro zone recovery is progressing.
HAWKISH ECB
In the wake of Monday's above-forecast euro zone inflation, the PMI surveys also showed rising price pressures, adding to expectations that European Central Bank President Jean-Claude Trichet will keep a hawkish tone on Thursday.
Implied interest rate futures suggest a nearly 80 percent possibility the ECB will raise rates by 25 basis points in August from the current record low of 1.0 percent.
Speculation that rates will rise has kept the two-year yield spread between German and U.S. government bonds at around 80 basis points, its widest in two years.
"Relative rate spreads are still favouring the euro to the dollar," said John Hydeskov, currency strategist at Danske.
The euro broke above $1.3740, around the 61.8 percent retracement of its November-January fall, which technical analysts said provided support and may open the way to $1.40.
The U.S. currency slipped to a four-week low around 81.47 yen, also helping to push the dollar index, which tracks the U.S. currency's value against a basket of other currencies, as low as 77.294, its weakest since early November.
AUSSIE RALLY
The Australian dollar rallied 1 percent on the day to a four-week high of $1.0080 after the country's central bank ended its monthly policy meeting with a generally upbeat assessment of the domestic and global economy.
Sterling jumped to a 2 1/2-month high of $1.6143 after UK manufacturing PMI hit a record high in January, adding more evidence that the sector is expanding while price pressures build, feeding the argument for a UK rate rise by mid-year.
"Markets are pricing in more chances of rate hikes and there is little to undermine sterling at the moment," said Adrian Schmidt, FX strategist at Lloyds TSB.
The Swedish crown also rallied, knocking the euro to a 10-year low of 8.786 crowns, after an above-forecast Swedish purchasing managers' survey.
(Additional reporting by Jessica Mortimer and Anirban Nag; editing by Patrick Graham)