FOREX-Euro hovers as market focuses on ECB meeting

* All eyes on ECB meeting; policy decision at 1245 GMT

* Dollar recovers slightly after hitting two-week low

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

LONDON, March 8 (Reuters) - The euro hovered near $1.24 on Thursday as the dollar recovered after the White House said some countries could be exempted from planned U.S. import tariffs, while traders awaited the outcome of a European Central Bank meeting later in the day.

All eyes will be on the ECB for clues about the speed and timing of monetary tightening and any signs it is starting to grow uncomfortable with the currency's strength. The euro trade-weighted index this week hit its highest since September 2014.

After rising sharply at the start of the year to hit a three-year high of $1.2556 in February, the euro has been stuck in a range in recent weeks as the dollar alternately rose and sold off depending on global risk appetite.

Investors pushed the euro higher on expectations that the ECB, which is expected to keep monetary policy unchanged on Thursday, will drop signals on how it plans to gradually rein in its huge stimulus programme.

"We'll be looking to infer what role the global external environment (stock market volatility and U.S. protectionism) is playing," said Viraj Patel, a currencies analyst at ING.

He expects a subtle change in the ECB's forward guidance that will remain broadly supportive for the euro, with a "potential test of $1.25 on the cards".

The euro traded down 0.1 percent at $1.2403 at 0830 GMT.

The dollar traded flat index against a basket of major currencies at 89.616 after pulling away from a two-week trough of 89.407 the previous day. The dollar fell against the yen, with the Japanese currency up 0.2 percent at 105.95 yen .

The greenback had weakened sharply following the resignation on Tuesday of Gary Cohn, the top economic advisor to the White House who was seen as seen as a bulwark against protectionism in President Donald Trump's administration.

Broader financial markets grew calmer, with Wall Street paring losses overnight. Some dealers have traded on the possibility that the tariff threat was a negotiating ploy in trade talks with U.S. neighbours.

The dollar's recovery was stoked by Wednesday's data on U.S. private hiring and labour costs that reinforced the view of underlying strength in the economy.

While worries about U.S. tariffs may have eased somewhat, the dollar's recovery was limited as fears of trade conflicts lingered, with Trump seen sticking to a protectionist stance in the longer run.

Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo, said that while the currency market was difficult to predict, the dollar "will almost certainly weaken" if that's what the United States wanted to happen.

"Along with tariffs, weakening your own currency becomes a weapon in a trade war," he said.

The Canadian dollar was slightly firmer at C$1.2908 per dollar, having weakened to C$1.3002 on Wednesday but recovering on the prospect that Trump's tariffs may exempt Canada and Mexico.

The Mexican peso was at 18.71 pesos per dollar following a recovery from 18.90 touched on Wednesday.

The Australian and New Zealand dollars were 0.2 percent higher at $0.7810 and flat at $0.7281, respectively. (Additional reporting by Shinichi Saoshiro in TOKYO; editing by John Stonestreet)