* Euro extends gains after Fed minutes, Weber comments
* But euro still faces hurdle at $1.40 area
* Euro break above $1.4025-45 would open way to more gains
* Dollar up vs yen, at record low on Swissie, index soft
By Charlotte Cooper and Hideyuki Sano
TOKYO, Oct 13 (Reuters) - The dollar came under broad selling
pressure on Wednesday, with investors emboldened to test key lows
against the euro, the Swiss franc and a basket of currencies as
more signs emerged pointing to U.S. policy easing.
The euro looked set for a challenge of $1.40 and its
eight-month high at $1.4030 after Federal Reserve minutes the day
before reinforced expectations of more quantitative easing, with
a sustained break above the $1.4025-45 area seen as heralding
further gains.
But traders were cautious that several currencies' uptrends
against the dollar, which revisited a record low against the
Swiss franc, were becoming stretched and the time for
consolidation could be near.
Dealers said hawkish comments from European Central Bank
Governing Council member Axel Weber on Tuesday, which highlighted
the difference in direction between Fed and ECB policy, gave the
euro an added lift, with talk of a big stop-loss buy order
lurking just below $1.40.
But they cautioned that euro zone policymakers were likely to
be increasingly unhappy if the euro rose above $1.40 <EUR=>.
"There's psychological resistance around $1.40 as (Eurogroup
Chairman Jean-Claude) Juncker has said he was not happy with the
euro reaching that level," a Japanese bank trader said.
"Still, it's hard to go long on the dollar when it's so
obvious that the United States wants a weaker dollar."
The euro rose 0.2 percent to $1.3955, triggering stop-loss
orders around $1.3950-60 before running into selling at
$1.3970-90. Resistance was expected at $1.3985, Friday's session
high, with talk of more stop-losses lined up above that level.
The $1.4030 high is seen as the target to beat if the euro is
to push higher rather than correct downwards.
Chartwise, it is seen gearing up to test the $1.4025-45 area,
with a sustained break opening the way for a rise to
$1.4195-1.4220 -- the lows of December and the highs of late
January.
On the downside, its 200-week moving average sits at $1.3926.
The euro gained across the board, climbing against the yen,
sterling and the Swiss franc.
Robert Ryan, currency strategist at BNP Paribas in Singapore,
said that although the U.S. quantitative easing theme was
starting to look overpriced, the risk was that reserve management
by Asian central banks could keep the euro going higher.
"As long as the market continues to see the BOJ, the BOE and
the Fed pumping liquidity in, it's going to go into emerging
markets and emerging markets are going to pump it back into the
euro," Ryan said.
"The euro is the safety valve for all these adjustments."
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PDF report on currencies: http://r.reuters.com/gez77p
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REBOUND IN THE OFFING?
Minutes of the Fed's Sept. 21 meeting showed officials
thought the struggling U.S. recovery might soon need more help
and they discussed several ways to provide it, including possible
adoption of a price-level target and the possibility of buying
more longer-term U.S. government debt. []
In contrast, Weber said the ECB's government bond-buying
programme had not worked and should be scrapped. []
The market has become very short of dollars on QE
expectations, raising the risk of a rebound as it becomes harder
for players to sell it down further.
"We are due for a short cover -- we're definitely due for
something. That might well be in the last quarter of the year but
there are no catalysts around at the moment," said Robert Reilly,
co-head of flow fixed income and FX for Asia at SG CIB.
A rise in U.S. Treasury yields, coming on the back of a
lacklustre debt sale, failed to give the dollar much of a boost
against the yen and it languished near a nine-month trough
against a basket of currencies. <=USD><.DXY>.
The dollar index fell 0.3 percent to 77.15, not far above the
nine-month low of 76.906 set last week, although it has bounced
off the 76.90 area twice in the past week.
The dollar also eased to a record low of 0.9546 Swiss francs
<CHF=> while the Australian dollar <AUD=D4> edged back towards
last week's 28-year high of $0.9918.
The dollar firmed 0.1 percent against the yen to 81.80 yen
<JPY=>, supported by nervousness that Japanese authorities could
intervene the closer it gets to its record low of 79.75 yen.
Finance Minister Yoshihiko Noda said in parliament that he
could not answer whether or not Japan would intervene in the
market.
But the dollar needs to rise above the 82.87-83.15 level to
neutralise its bearish trend and traders doubt that will happen,
given hefty offers expected from Japanese exporters.
The dollar hit a 15-year low of 81.37 yen on Monday.
(Additional reporting by Reuters FX analysts Krishna Kumar in
Sydney; Editing by Edmund Klamann)
