* Dlr down slightly on speculation Fed may suggest more QE
* Aussie rallies after hawkish comments from RBA's Stevens
* Dlr/yen little changed, investors wary of intervention
(Adds comments, details. Changes byline and dateline, previous
LONDON)
By Vivianne Rodrigues
NEW YORK, Sept 20 (Reuters) - The dollar slipped on Monday
on speculation the Federal Reserve may suggest the need to
inject more stimulus into the struggling U.S. economy when it
announces its latest policy decision on Tuesday.
The possibility of more Fed quantitative easing -- seen as
currency-negative -- highlighted differences in policy among
major central banks, as the Australian dollar hit a two-year
high on hawkish Reserve Bank of Australia comments.
The greenback traded in a thin range against the yen
because of a market holiday in Japan and as investors were
cautious of taking big yen positions after Japan's intervention
last week to curb the strength of its currency.
The Fed is expected to refrain from implementing new steps
to ease monetary policy on Tuesday, while renewing its promise
to keep its portfolio of assets from shrinking.
"Trading may remain range-bound ahead of tomorrow's FOMC
meeting," said Boris Schlossberg, a director of currency
research at GFT Forex in New York.
"Markets are wary of both the sovereign debt risk in Europe
and the QE risk from the Fed," he added. "However, if the Fed
does not alter its language from last month's statement, thus
implicitly signaling that QE will not be an option in the near
term, the greenback may strengthen as the week progresses
especially if risk aversion flows return."
In morning trading in New York, the U.S. currency was
little changed against a currency basket, after falling to
81.046 <.DXY>, near a five-week low of 80.865 hit last week.
The Australian dollar <AUD=> rose more than 1 percent
earlier to $0.9469, its strongest since mid-2008, after Reserve
Bank of Australia Governor Glenn Stevens suggested Australian
interest rates would rise further.
Gains were capped, however, with traders citing talk of a
large option being defended at $0.9475 with expiry at the end
of the month. A break above there, however, would prompt
traders to target the psychological $0.95 level.
FED AHEAD
A sluggish U.S. recovery has stung the dollar in recent
months as it has raised the possibility of more quantitative
easing, although recent U.S. data -- while still weak -- has
shown a slight improvement.
"The consensus is that the Fed won't do anything tomorrow,
but if they indicate that more QE may be on the way, it would
send a strong signal to sell the dollar during the week," said
Kasper Kirkegaard, currency strategist at Danske in Copenhagen.
The euro was little changed after climbing to as high as
$1.3120, helped by a rise in European shares, though sentiment
toward the single currency was still dented by concerns about
Ireland's finances.
Ireland's central bank said the country would need to
rethink plans to cut a bloated budget deficit.
Against the yen, the dollar was flat at 85.72 yen <JPY=>,
keeping in a tight range after Japan intervened last week,
pulling the U.S. currency up from a 15-year low.
Further dollar gains were capped by its 55-day moving
average, which came in at 85.88 yen on Monday, and investors
were focused on whether the dollar would break above 86.00 yen.
"Asian markets were quiet overnight with the dollar/yen
staying in a relatively quiet range as Japan was on holiday,"
said Brad Bechtel at Faros Trading LLC, in Connecticut.
Bechtel said dollar/yen traded in a 85.60-70 range with a
brief dip to 85.50 as London walked in but that was
"momentary."
In addition to the prospect of more intervention, strength
in the Japanese currency may subside as speculators have
slightly cut long yen positions -- bets that it will
appreciate.
The latest Commodity Futures Trading Commission data shows
net long yen positions fell to 47,642 as of last Tuesday, the
day before Japan entered the market, from 52,183 the previous
week.
(Additional reporting by Naomi Tajitsu; Editing by Padraic
Cassidy)
