* Euro near 6-wk high vs dollar after peripheral debt sales
* Dollar slips on caution that FOMC may hint at more QE
* Intervention fear keeps yen buying in check
(Updates prices, adds quote)
By Jessica Mortimer
LONDON, Sept 21 (Reuters) - The euro rose against the dollar
on Tuesday, helped by solid demand at sales of peripheral euro
zone debt, while expectations that the Federal Reserve may
debate more monetary easing kept investors away from the
greenback.
Irish, Greek and Spanish government debt auctions attracted
decent demand, easing concerns about whether the euro zone's
highly indebted countries can obtain the funding they need.
[] [] []
Spreads between peripheral euro zone and German bond yields
narrowed, while European equities <> rose, lifting the
euro to near a six-week high against a weak dollar.
Few expect the Fed to apply another dose of quantitative
easing (QE) when it announces its decision around 1815 GMT, but
the statement is expected to be dovish due to recent evidence of
a weakening economy. []
"The fact that the auctions were relatively well-received
helped the euro develop some bullish momentum and it has broken
through resistance at $1.3120," said Stephan Maier, currency
strategist at Unicredit in Milan.
The euro <EUR=> was up 0.55 percent at $1.3135, not far from
a six-week high of $1.3160 hit on Friday.
While the euro holds above the $1.3030 area, some chartists
see its Aug. 6 high of $1.3334 as an upside target, but there
are hurdles before it gets there, including the 200-day moving
average, which comes in at about $1.3220.
The dollar index <.DXY> was down 0.38 percent at 81.022,
edging towards a six-week low of 80.865 hit last week.
"The consensus is that the Fed won't announce any QE today,
but no one wants to be long dollars going into the meeting,"
said Niels Christensen, currency strategist at Nordea in
Copenhagen.
"The statement might be quite dovish, which could intensify
speculation of more QE later in the year. This would leave the
dollar vulnerable."
YEN JITTERS REMAIN
Against the yen, the dollar struggled <JPY=>, trading down
0.3 percent at 85.41 yen, but fear of more intervention by
Japanese authorities to curb yen gains limited the greenback's
losses. Traders reported stop loss orders around 85.20 yen.
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For a PDF on the yen click: http://r.reuters.com/fac44p
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The dollar has failed to climb above its post-intervention
high of 85.94 yen set last Friday, capped by Japanese exporter
selling ahead of their half-year book-closing on Sept. 30, and
more sales are expected towards the 86 yen level before then.
Its 55-day moving average, now at 85.87 yen, has become a
resistance level since Japan intervened last Wednesday, and
further resistance lies at 86.26, the bottom of its daily
Ichimoku cloud trend indicator.
Some market players do not rule out another push by Japanese
authorities to shunt the greenback above 86 yen. Many doubt they
would let the dollar fall below 85.00.
Still, downside risks for the dollar/yen remained, should
the Fed lay the ground for further quantitative easing.
"It will be a close call, since some of the recent data show
the U.S. economy is stabilising," said Lee Hardman, currency
economist at BTM-UFJ. "But if the Fed signals more QE, U.S.
yields could fall and take the dollar lower against the yen."
The dollar/yen pair has a very strong correlation to the
spread between U.S. and Japanese government bond yields.
Meanwhile, the Australian dollar <AUD=D4> stayed near a
two-year peak of $0.9495 <AUD=D4> hit on Monday after the
country's central bank chief suggested Australian interest rates
would rise further. [].
(Additional reporting by Anirban Nag; Editing by Hugh Lawson)
