* Dollar seen remaining pressured if Fed disappoints
* Euro gains on the day vs dollar with $1.50 eyed
* Aussie drops after hitting post-float peak
(Updates prices, adds details)
NEW YORK, April 25 (Reuters) - The euro rose against the
dollar on Monday in a volatile but illiquid session with
investors reluctant to make large bets in case the U.S. Federal
Reserve shows no sign this week of changing its easy monetary
policy.
With many markets closed for the Easter holiday and no
major U.S. economic reports on the calendar, the Fed's meeting
on Tuesday and Wednesday will be the key event risk this week
as traders try to gauge the direction of U.S. policy.
Market participants will look to the post-meeting news
conference by Fed Chairman Ben Bernanke on Wednesday -- the
first regularly scheduled news briefing by a Fed chief in the
U.S. central bank's 97-year history -- to see how the Fed plans
to exit from its ultra-loose policy.
If the Fed surprises the market and turns more hawkish it
will pose a risk to the sizable amount of dollar shorts in the
market.
Currency speculators pared bets against the U.S. dollar for
a fourth straight week, according to data from the Commodity
Futures Trading Commission released Friday, but were still net
short to the total of $24.36 billion. For details, see
[]
"The united currency is unlikely to move very far in either
direction until the chairman of the Federal Reserve has
completed his first-ever press briefing" after the rate
announcement by the policy-setting Federal Open Market
Committee, said Joseph Trevisani, chief market analyst, FX
Solutions, LLC in Saddle River, New Jersey. "The questions
surrounding the twin topics of quantitative easing and rate
policy should be enough to keep traders on the sidelines until
then."
The dollar index, which measures the currency's value
against six major currencies, was little changed at 74.024
<.DXY>. However, many traders say it could test a three-year
low of 73.735 hit last week. A break of that level could open
the way for a test of the record low of 70.698 touched mid-July
2008, according to Reuters data.
If Bernanke indicates that the Fed's accommodative policy
may continue for the foreseeable future, the dollar will likely
see selling pushing the euro/dollar toward the $1.5000
psychological barrier, strategists said.
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For graphic on Fed funds rate hike expectations:
http://r.reuters.com/xyz48r
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"The bond and currency market reaction is still an unknown
and a significant risk," said Camilla Sutton, chief currency
strategist at Scotia Capital in Toronto.
The Fed is expected to confirm its $600 billion asset
purchase program, known as QE2, will end as scheduled in June.
The program is a bane for the dollar since it is tantamount
to printing money, so an indication that it may end earlier
would be positive for the beaten-down currency. The euro is up
nearly 9 percent against the dollar this year.
Once QE2 ends there will be some upward pressure on yields.
With U.S. monetary policy still notably weak, an extended
dollar rally is not likely, Sutton said.
"This is the medium-term risk; the near-term risk lies in
the wording of the statement, any shift in tone, the press
conference itself and the FOMC's updated set of forecasts," she
said.
The euro <EUR=> was last at $1.4576 up 0.1 percent on the
day.
The Australian dollar touched its highest level since the
currency was floated in December 1983, before falling to tradeat $1.0721 <AUD=D4>, down 0.2 percent on the day.
Against the yen, the dollar fell 0.2 percent to about 81.70
yen <JPY=>. Dollar/yen has weakened from roughly 85.50 since
early April with recent support seen just below 82, Scotia's
Sutton said.
(Editing by Leslie Adler)
