* 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
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
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
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".