* German Ifo falls short of forecast
* Draghi LTRO comments still weigh on euro
* Dudley says Fed expects slower U.S. growth now
* Says he will not rule out Fed trimming stimulus this year
By Anooja Debnath
LONDON, Sept 24 (Reuters) - The euro fell against the dollar on Tuesday after German sentiment data came in slightly below expectations and on further signs the European Central Bank was not ready to exit its crisis measures.
German business morale improved slightly in September to touch a 17-month high, data from the Ifo think tank showed.
The September reading was better than August's but the euro dipped as it fell short of the consensus forecast.
The single currency was down 0.1 percent at $1.3480. Support was cited at the August high of $1.3453. Large options expiries were reported at $1.3500 and $1.3200.
ECB President Mario Draghi's comments on Monday that the central bank was prepared to offer banks more long-term loans to keep money-market rates from rising to levels that could hurt the economy, also dragged on the euro.
His message was reinforced by ECB Governing Council member Ewald Nowotny, who said on Tuesday it was too soon for the bank to go into exit mode from its crisis measures
"The market sentiment wasn't helped by the slightly softer Ifo numbers and also the Draghi comments suggesting that the outlook remains uncertain and that there is a good chance there would be more monetary easing," said Paul Robson, currency strategist at RBS.
The dollar was weighed down by central banker comments suggesting the Federal Reserve was wary of threatening a still fragile U.S. recovery.
New York Fed President William Dudley, a well known dove and close ally of Fed Chairman Ben Bernanke, defended the central bank's shock decision last week to keep its stimulus in place.
The economy was weaker than the Fed thought in June, he said in an interview on CNBC, but "wouldn't rule out" a cut in the central bank's stimulus this year.
Markets are also concerned that a political showdown in Washington could see the government shut down, or at the very extreme, default on its debt.
"The market is getting nervous about the U.S. debt deal. It's not clear whether they can reach a deal easily," said Minori Uchida, chief FX strategist at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
The dollar was up 0.1 percent at 80.546 against a basket of currencies, having hit a seven-month trough of 80.06 last week.
Analysts said the dollar was weighed down by slipping U.S. Treasury yields. Benchmark 10-year U.S. Treasury yields were last at around 2.69 percent, having fallen from the near two year high of 3.007 percent hit on Sept. 5.
Citi technical strategists cited interim support at 2.40 percent, a break of which could see yields fall to 2.17 percent.
"It is hard to see the curve steepening dramatically in the U.S. without some signs of cyclical out-performance in the economy or a change in sentiment about the Fed," Robson said.
The dollar was flat at 98.85 yen, while the euro was down 0.1 percent at 133.25 yen.
Chart: WorldWideMarkets Flash Trader