* Dollar steadies on uncertainty before FOMC next week
* UK GDP, S&P lifts pound; Swedish crown falls on Riksbank
* Dlr/yen up; Japan finmin: to take steps on FX if needed
(Updates prices)
By Jessica Mortimer
LONDON, Oct 26 (Reuters) - The dollar steadied on Tuesday,
with investors wary of pushing it lower due to some uncertainty
about what easing measures the Federal Reserve may take next
week, while UK economic growth figures lifted sterling.
The Swedish crown was the other significant mover, falling
sharply after the central bank raised interest rates as expected
but said future rate hikes would be more gradual than previously
expected. []
The market expects the U.S. Fed to opt for more quantitative
easing (QE) next week, but some easing is seen priced into an
already weak dollar. How much QE the Fed decides on and how
gradually it will implement is uncertain, keeping investors edgy
about building more bearish bets on the dollar.
It rose against the yen, edging away from 15-year lows after
Japan's finance minister Yoshihiko Noda warned the government
would "act decisively" in currency markets if needed.
[]
His comments pushed the greenback back above 81 yen, with
traders citing buying from Japanese life insurers and banks,
among others, on the view that Japan may intervene if the dollar
nears 80.00 yen.
"Japan has pointed out quite clearly that they will
intervene in dollar/yen if it falls too quickly and the market
is aware there is no easy one-way bet on dollar/yen downside,"
said Stephan Maier, currency strategist at Unicredit in Milan.
"Everything is dependent on the FOMC (U.S. Federal Open
Market Committee) and people don't want to take aggressive
positions ahead of this very big decision," he said.
At 1120 GMT, the dollar was up 0.47 percent at 81.14 yen
<JPY=>. It hit a 15-year trough at 80.41 yen on Monday, taking
it near its record low of 79.75 yen, struck in April 1995.
Against a basket of currencies <.DXY> the dollar was up 0.26
percent at 77.313. It has support around 76.00-10, just below
its Oct. 15 low of 76.144 while resistance is seen at 78.40.
The euro fell 0.26 percent to $1.3926 <EUR=> after failing
to close above $1.4000 on Monday. The euro has support at
1.3860, its low on Friday, and its 21-day moving average at
$1.3866.
"The dollar is in a bit of a holding pattern. The market is
still mulling over the U.S. QE story and dollar selling is a bit
less of a one-way bet than it was," said Jeremy Stretch,
currency strategist at CIBC.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a PDF on the G20's uneasy truce on currencies
and trade imbalances: http://r.reuters.com/nan99p
For an FX column on the Fed: []
For a Q&A on Japan intervention: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Overnight, New York Fed President William Dudley said the
Fed could provide "essential" support to the U.S. economy,
although it was uncertain whether an incremental or big bang
approach to asset purchases was better.
However, his colleague Kansas City Fed President Thomas
Hoenig warned more easing would be a "dangerous gamble".
[]
STERLING JUMPS, SWEDISH CROWN FALLS
Sterling was a clear outperformer, rising 1 percent against
the dollar <GBP=D4> to a one-week high at $1.5897 after figures
showed the UK economy grew 0.8 percent in the third quarter,
twice as much as economists had forecast. []
Growth still slowed from the second quarter but the data
bolstered the pound as investors saw less chance that the Bank
of England would announce more monetary stimulus next month.
Sterling extended gains after S&P rating agency raised its
outlook on the UK to stable from negative. []
The Swedish crown fell broadly meanwhile, with the euro
rising more than 1 percent to 9.2830 crowns <EURSEK=>.
Analysts said the 25 basis point hike in interest rates had
already been priced into the crown, while the surprise news of a
slower tightening path tempered investors' recent bullish view
on the currency.
"The market had been pricing in a hike, and now the Riksbank
has suggested there is not the case for such strong hikes next
year, which has clearly pushed euro/Swedish crown higher,"
Unicredit's Maier said.
(Editing by Susan Fenton)
