FOREX-Dollar steady as market awaits Fed decision

Reuters

* Dollar index steadies, near earlier one-week high

* Traders trim bearish dollar bets before Fed decision

* Markets priced for Fed leaving stimulus intact until 2014

* Euro up slightly after solid euro zone sentiment data

By Jessica Mortimer

LONDON, Oct 30 (Reuters) - The dollar steadied near an

earlier one-week high against a basket of major currencies on

Wednesday, with investors wary of selling it before a

post-policy meeting statement from the Federal Reserve.

The dollar index stood at 79.541, having touched an

eight-day peak of 79.692. It remained well above Friday's

nine-month low of 78.998.

The Fed's Federal Open Market Committee (FOMC) is widely

expected to keep its massive bond-buying programme unchanged

when it announces its decision at 1800 GMT and to signal that it

is unlikely to begin scaling back the stimulus programme until

2014.

Still, analysts said expectations of a delay to Fed

tapering, probably until at least March, may be already priced

into the dollar, prompting investors who sold the U.S. currency

in recent days to start buying it back.

"With the Fed event risk people don't want to enter new

short positions," said Chris Turner, head of currency strategy

at ING.

However, he said the dollar was likely to turn weaker after

the Fed announcement, potentially pushing the euro beyond its

recent highs, unless policymakers stressed the economic impact

of this month's U.S. government shutdown would be temporary.

The dollar was also pulled off its highs as the euro turned

slightly higher after data showed a jump in euro zone sentiment

in October, which offset figures revealing an unexpected rise in

the German jobless total.

The euro was up 0.1 percent at $1.3762, having backed

off a 23-month peak of $1.3833 set on Friday. Traders said the

euro's failure to make a sustained break above $1.3800 left it

vulnerable to a correction.

The euro was also supported by comments late on Tuesday by

European Central Bank Governing Council member Ewald Nowotny,

who said he saw no tools the central bank could use to dampen a

strengthening euro.

Against the yen, the dollar was up 0.1 percent at 98.22 yen

, having hit a one-week high of 98.315 yen.

A majority of U.S. primary dealers polled by Reuters last

week said the Fed would not start cutting monthly bond purchases

until next March.

"Everyone is expecting a cautious statement on the economic

outlook, pointing to no tapering until next year," said Niels

Christensen, currency strategist at Nordea.

He said any signal the Fed was prepared to scale back

stimulus before year-end would be a surprise and cause "a huge

positive dollar reaction".

The Australian dollar was up 0.25 percent at

$0.9495, recovering from an earlier 2-1/2 week low of $0.9459

after Reserve Bank of Australia Governor Glenn Stevens said the

currency was "unusually high".

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