NEW YORK (Reuters) - The dollar rallied on Thursday after suffering steep losses in the last two sessions, rising on data showing the U.S. economy grew in the fourth quarter in line with market expectations.

The data, coupled with a separate report showing a decline in jobless claims in the latest week, did not change the market's view about the need for further U.S. interest rate cuts to boost a weakening economy. But it did ease concerns about a much sharper slowdown.

"The numbers this morning had an impact on the dollar. We'll take any upside surprise we can get at this point," said Rhonda Power, corporate trading manager at Travelex Global Business Payments in Toronto.

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"But there are still some significant concerns about the economy. With this subprime situation unresolved, we think there is still negativity in the market," she added.

In midday New York trading, the euro was down 0.4 percent on the day at $1.5777, a bit more than 1 cent below last week's record highs above $1.59. But the euro was still up more than 8 percent this quarter, remaining on track for its strongest quarterly performance since late 2004.

Against the yen, the dollar rose 0.7 percent to 99.680 yen. The dollar gained half a percent against the Swiss franc to 0.9937.

In its final estimate of fourth-quarter gross domestic product, the Commerce Department said on Thursday that economic growth slowed to an annual pace of 0.6 percent from a robust 4.9 percent in the previous three months.

The number was unchanged from the government's previous estimate. Some in the market had been bracing for a much weaker number given the spate of bad news in recent months.

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