By Jessica Mortimer LONDON (Reuters) - The euro was a touch higher against the dollar on Tuesday, reversing earlier losses as a firmer-than-expected German sentiment survey offset concerns about the country's banking sector. Trading volumes were thin, with major currency pairs confined to their recent ranges ahead of the U.S. Thanksgiving holiday on Thursday. The euro was helped by a bigger-than-expected rise in the German Ifo November business climate index to 93.9, a level not seen since the collapse of Lehman Brothers last year, lifting optimism that Germany's recovery can gain momentum. Investors remained concerned about stricken German state-backed lender WestLB WDLG.UL, which faced a down-to-the-wire search for funds to help unload toxic assets as its majority owners balked at more support. "Concerns about German banks weighed on the euro at the start of the session, but the firmer-than-expected Ifo has probably prevented a more intensive sell-off," said Roberto Mialich, FX strategist at Unicredit in Milan. "Market activity is tight before the Thanksgiving holiday and the euro would have to break above $1.50 and then $1.55, or break below $1.48 and $1.4765, to gain more momentum," he said. By 7:39 a.m. EST (1239 GMT), the euro was up 0.1 percent at $1.4975, after falling as low as $1.4889. It hit a one-week high of $1.5001 on Monday but has recently struggled to hold above $1.50. Traders cited options with a strike price of $1.5000 and $1.5050 set to expire later in the day. Against the yen the euro was down 0.3 percent at 132.68 yen. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was steady at 75.064 .DXY. BANK CONCERNS The dollar and yen gained against riskier currencies on worries about the global banking system after a report on Monday by U.S. ratings firm Standard and Poor's raised concerns about the health of some major banks. "Rallies on risk assets are showing diminishing returns, and major currencies are looking stretched against the dollar," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. The yen firmed, with the dollar down 0.4 percent to 88.58 yen, after earlier touching a six-week low of 88.56 yen on trading platform EBS. Recent trends have seen investors opting to buy the dollar and the yen -- seen as safe havens -- against higher-yielding currencies and to sell assets like stocks and commodities when economic optimism diminishes. Among perceived higher risk and commodity-linked currencies, the Australian dollar was down 0.4 percent at $0.9203, off a 15-month high of $0.9407 last week, while the New Zealand dollar lost 0.7 percent to $0.7281. Traders will focus on U.S. economic indicators later in the day, including revised U.S. gross domestic product for the third quarter and housing market data. The U.S. Federal Reserve will release minutes of its November 3-4 meeting, and markets will look for any hints on when and how the Fed will draw down extraordinary economic support measures. The minutes also include economic projections.

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