FOREX-ECB on hold, news conference in focus; dollar struggles

* ECB keeps rates unchanged, press conference at 1230 GMT eyed

* Markets expect ECB LTRO later this year

* Berlusconi to support Italian PM Letta in confidence vote

* Dollar under pressure given US political deadlock

By Anooja Debnath

LONDON, Oct 2 (Reuters) - The euro held steady against the dollar on Wednesday ahead of a European Central Bank news conference where President Mario Draghi will be watched for signs of any further stimulus.

The ECB kept its main refinancing and deposit rates on hold as was widely expected.

The dollar remained subdued as the ongoing political wrangling in the U.S., which has led to a partial government shutdown showed no signs of a resolution.

The euro was flat at 1.3521. It had hit an eight month high of $1.3589 in the previous session. Support was cited at $1.3453, the high seen in August.

Draghi's conference will be closely watched for signs the bank may move to pump more ultra-cheap funds into the market, possibly by the year-end.

"There is a small negative risk to the downside for the euro as the ECB is likely to sound quite dovish in its press conference," said Adam Cole, global head of FX strategy at RBC Capital Markets.

Some analysts said Draghi could stress the prospect of making more long-term loans available as a means of tempering the euro's appreciation.

Peter Kinsella, currency strategist at Commerzbank said that the ECB might point to recent positive euro zone data but would try to curb any optimism.

"It is clear from their forward guidance a few of months ago that they want to keep the euro at reasonably lower levels."

In a reflection of heightened uncertainty in the market one-month euro/dollar implied volatility, a measure of expected price swings and derived from option prices, rose to around 7.60, its highest since early September.

The euro also found some support on growing signs Italian Prime Minister Enrico Letta will survive a confidence vote later on Wednesday.

Italian centre-right leader Silvio Berlusconi backtracked from his attempts to bring down the government and told the Senate his party would support Letta.

"Italian political concerns seem to be blowing over already... assuming the government survives today this mini political crisis appears to be mostly over," Cole said.


In the U.S., concerns over a partial government shutdown kept the dollar under pressure. Its index was last down 0.1 percent at 80.152, having fallen to a near eight-month low of 79.864 on Tuesday.

The greenback was down 0.5 percent at 97.49 yen. It had earlier slid to a one month low of 97.305 yen.

The yen, which tends to benefit in times of market turmoil, also rose against the euro. The single currency was down 0.6 percent at 131.71. Long-term trendline support was cited around 131.55/60 according to CitiFX Wire, a news service for Citi's clients.