FOREX-Dollar steadies, with dealers cautious of a bounce

                                
 * Dollar drops to 15-yr low on yen before finding support
                                
 * Lack of G7/IMF coordination leaves focus on G20 in Nov
                                
 * Recycled FX reserves may find way to euro, Australia
dollar
                                
 * Net US dollar short position at $30 bln on IMM
                                
 By Kevin Plumberg
                                
 HONG KONG, Oct 11 (Reuters) - The dollar stabilised on
Monday with risks of a short-term bounce growing despite
expectations the Federal Reserve will have to print money to
support the economy and international currency policy disarray.
                                
 The dollar fell to a 15-year low of 81.40 yen but later
clawed higher. The prospect remained that Japan could come into
the market to cap the yen's rise, though for now some dollar
bids in thin trading conditions put a floor under the pair.
                                
 With bets against the dollar piling up, chances of sudden
corrective moves higher were growing, even though there were
few doubts about the medium-term negative view.
                                
 "Profit taking in G10 currencies versus the U.S. dollar
looks to be the name of the game first up in Asia," said Sue
Trinh, senior currency strategist with Royal Bank of Canada in
Hong Kong.
 "However, we're seeing a return to conventional price action
post-payrolls whereby speculation the Fed will embark on
another round of QE is causing weak U.S. data to be seen in a
weak U.S. dollar dynamic." [ID:nN08205203]
                                
 The dollar sank to 81.40 yen <JPY=> after tripping stop
loss sales on the break of Friday's lows of 81.71. Traders said
bids quickly emerged, helping the dollar back to 82.00 yen,
nearly unchanged on the day.
                                
 A holiday in Tokyo robbed the market of some liquidity and
traders were wary in case the Bank of Japan intervened. The
risk of intervention seemed to have grown after Japan weathered
the flurry of weekend G7 and IMF meetings with hardly any
criticism of its recent bout of yen sales.
                                
 The euro was at $1.3962 <EUR=>, up slightly on the day,
after earlier climbing as high as $1.4011, seeking to test last
week's $1.4030 high. A rise above technical resistance at
$1.4045 would bring on the next obstacle at $1.4216, which
acted as support on Dec. 22, when the euro was declining.
 All the talk of quantitative easing sent commodity prices
surging on Friday and in turn lifted the Australian dollar to
$0.9895 <AUD=D4>, not far from its recent 28-year peak of
$0.9918.
                                
 After jumping earlier on Monday, the Aussie was at $0.9852,
steady compared with late Friday in New York.
                                
 The euro and the Australian dollar could prove to be the
paths of least resistance to express a longer-term weak U.S.
dollar view, especially if central banks seeking to diversify
their growing foreign exchange reserves into these
strengthening currencies.
                                
 Still, the inability of the euro to pierce $1.4045 and the
Australian dollar to convincingly climb above the 28-year high
of $0.9918 in coming days could cause some investors with short
time horizons to throw in the towel. [ID:nSGE69A027]
                                
 DATA DRIVES DOLLAR WEAKNESS
                                
 The September U.S. employment report showed the labour
market shrank a fourth consecutive month for a cumulative
393,000 jobs lost since June.
                                
 For many market participants, the data cemented the case
that the Fed will have to shift toward quantitative easing
before year end, causing the U.S. Treasury yield advantage over
other major currencies to narrow further and adding to the case
against the dollar.
                                
 In the third quarter ended September 2010, the dollar index
<.DXY>, a gauge of performance against six other major
currencies, posted its largest quarterly decline since the
second quarter of 2002.
                                
 The IMF's failure to get any agreement on global imbalances
at multilateral meetings over the weekend seemed to ensure that
currency tensions would only fester further and left dealers
wondering when more governments would take action to shift the
burden of the falling dollar. [ID:nN10287368]
                                
 The lack of coordination among the Group of Seven rich
nations over the weekend raised the stakes for a series of
meetings between G20 officials next month and whether the
larger body can defuse global currency tensions over the
falling dollar.
                                
 Robert Ryan, Asia foreign exchange and interest rate
strategist with BNP Paribas in Singapore, believes the dollar
may rebound if the Fed signals its intention ahead of the G20
meetings not to embark on a more modest programme to buy assets
than the market is anticipating.
                                
 "I think we need to fade QE," he said.
                                
 Another near-term obstacle to further dollar weakness is
simply that speculators have already sold off the dollar
heavily and have amassed a large short position.
                                
 Short-term investors on the International Monetary Market
had a net short U.S. dollar position of $30.5 billion in the
week ended Oct. 5, up from $22 billion in the prior week, CFTC
data showed. [ID:nN08169848]
                                
 The minutes of the Fed's September 21 meeting are due on
Tuesday and the market will be keen to see how much agreement
on further easing there was within the board.
 (Additional reporting by Reuters FX analysts Krishna Kumar and
Rick Lloyd; Editing by Kazunori Takada)