Aug 29 (Reuters) - German bond yields fell and the euro

dropped against the dollar after German state inflation data led

investors to slightly increase their bets on the European

Central Bank future rate cuts.

Germany's 10 year yield was last down 1 basis point at 2.24%

having earlier been around 2.28%.

The euro fell 0.3% to $1.1088, a session low,

having being up slightly right before the release of inflation

figures.

Money markets priced in 67 basis points of European Central

Bank rate cuts by year-end from 63 bps before

the data.