FOREX-Euro falls after report on ECB deposit rates; Fed minutes hint taper

* Fed minutes raise possibility of QE tapering in next few

months

* ECB considering negative deposit rates -Bloomberg

* Bernanke: Rates may stay near zero after bond-buys end

* U.S. inflation unexpectedly falls in October

By Gertrude Chavez-Dreyfuss and Daniel Bases

NEW YORK, Nov 20 (Reuters) - The euro tumbled across the

board on Wednesday after a report that the European Central Bank

is considering negative deposit rates to boost inflation closer

to its target.

Additional selling pressure on the euro ensued after the

release of minutes from the U.S. Federal Reserve's October

interest rate policy-setting meeting. The minutes showed many

members felt the downside risks to the economic outlook have

diminished and if data warranted it could decide to slow the

pace of quantitative easing at one of its next few meetings.

"The (forex) market is starting to perhaps pull forward the

potential for tapering and might even put December back on the

table. I think a lot will be riding on the November labor

report," said Brian Daingerfield, currency strategist at Royal

Bank of Scotland in Stamford, Connecticut.

Tapering of the bond purchases would lead to a rise in

interest rates, making U.S. dollar-based investments more

attractive to investors hunting for higher yields.

Earlier, Bloomberg reported that if the ECB decides to take

the deposit rate for cash it holds overnight for banks into

negative territory, the rate would fall to -0.1 percent. The

ECB's current deposit rate is at zero. An ECB spokesperson

declined to comment.

The ECB cut interest rates to a record low this month, and

President Mario Draghi said the central bank was "technically

ready" for negative rates, if warranted by the economy.

The news from Europe was in stark contrast to the latest

views by Federal Reserve policymakers.

James Bullard, president of the St. Louis Federal Reserve

Bank, on Wednesday told Bloomberg television that recent U.S.

economic data is looking better and a "strong" jobs report for

November would increase the likelihood that the Fed may decide

to start scaling back bond buying next month.

"The news highlighted the opposing outlooks for monetary

policy in the euro zone compared to the U.S. where the Fed

appears on a steady path to reducing stimulus," said Joe

Manimbo, senior market analyst at Western Union Business

Solutions in Washington.

The euro fell as low as $1.3417 on the ECB news and

Fed minutes, and last traded at $1.3428, down 0.81 percent.

Against the yen, the euro dropped to a fresh session low of

134.38 yen, off 0.84, after the Fed minutes. It

earlier touched a four-year high.

Ulrich Leuchtmann, head of FX research at Commerzbank (Xetra: CBK100 - news) in

Germany, said the euro had been recovering from an unjustified

selloff since the cut in euro zone interest rates earlier this

month, but that move has run its course.

"From a fundamental perspective it makes sense for there to

be" a rebound in the euro, he said. But "the justified

correction has run out of steam."

Around one-quarter of ECB council members, led by Bundesbank

chief Jens Weidmann, spoke out against the rate cut this month,

and those divisions were highlighted on Wednesday when Weidmann

said the ECB should not signal any further easing of its

monetary policy for now.

The dollar index, meanwhile, got a boost, rising 0.47

percent to 81.093.

The U.S. currency had been under pressure earlier in the

global session after Fed Chairman Ben Bernanke stated in no

uncertain terms that the U.S. central bank would maintain its

ultra-easy monetary policy for as long as needed.

Bernanke said late on Tuesday that officials wanted evidence

of durable job growth before scaling back the Fed's bond-buying

stimulus, adding that interest rates were likely to remain near

zero for a considerable time after the asset purchases end.

A mixed set of U.S. economic data, on the other hand,

provided no clue as to when the Fed will eventually reduce its

asset purchases, with a fall in consumer prices in October

largely offsetting a faster-than-expected rise in retail sales.

In a speech that echoed dovish comments by Janet Yellen, the

Fed vice chair who is the nominee to become the Fed chief,

Bernanke said while the economy had made significant progress,

it was still far from where officials wanted it to be.

The FOMC next meets on Dec. 17-18.