FOREX-U.S. dollar gains on private payrolls, FOMC looms

                                
  
                                
 * U.S. private payrolls report helps dollar
                                
 * FOMC in focus; open-ended approach key to dollar outlook
                                
 * Dollar/yen trades above 81 yen
 (Recasts, adds comment, U.S. data, updates prices, changes
byline, dateline; previous LONDON)
                                
 By Gertrude Chavez-Dreyfuss
                                
 NEW YORK, Nov 3 (Reuters) - The dollar rose on Wednesday,
boosted by better-than-forecast U.S. private payrolls data, but
trading was confined to narrow ranges as markets awaited a
Federal Reserve decision to further ease monetary policy.
                                
 The expected Fed announcement may push Treasury debt yields
lower and diminish the appeal of some U.S. assets, although
analysts said the decision has been pretty much priced into the
market the last few sessions.
                                
 "I don't think many people would want to make waves ahead
of the Fed announcement this afternoon," said Ron Simpson,
director of currency research at Action Economics in Tampa,
Florida.
                                
 "For the most part, some form of quantitative easing has
been priced in by the market. In my mind, the risk after the
announcement for the dollar is to the upside only because the
the dollar has been sold so much against most currencies."
                                
 Markets were generally priced for the Fed initially to
commit to buying at least $500 billion in Treasuries over five
months in a fresh bout of quantitative easing, but traders were
eager for details of the scope and pace of bond purchases.
                                
 Ahead of the Federal Open Market Committee statement,
traders said option expiries are expected to dictate price
action.
                                
 In early morning trading, the euro <EUR=EBS> was slightly
lower at $1.4016, held in a $1.4000-50 range for much of the
session. Option expiries at $1.4000 and $1.4050 later in the
day were seen influencing intraday price action.
                                
 The dollar rose 0.7 percent against the yen to 81.13
<JPY=EBS>, within striking distance of this week's 15-year low
of 80.21, according to electronic trading platform EBS. The
all-time low of 79.95 yen was also in focus as the market
stayed sensitive to the potential for fresh Japanese
intervention to stem the yen's rise.
                                
 Gains in dollar/yen were helped by U.S. data showing
private sector payrolls rose 43,000 last month, with
September's figures revised upward. For the report click on
[ID:nEAP10330].
                                
 Sterling <GBP=D4> hit a nine-month high of $1.6157 after
stronger-than-expected UK services sector activity data added
to the view that the Bank of England may not implement more QE
any time soon. [ID:nLDE6A20TQ] Sterling last traded up 0.3
percent at $1.6096.
                                
 Traders also said liquidity had dried up since the start of
the week, with one trader in London saying his turnover in the
past two days had been the lowest in five years.
                                
 He added the market was expecting the Fed announcement to
offer more clarity on whether the dollar's latest sell-off
since September would continue through the end of 2010.
                                
 "Irrespective of recent ratcheting down of Fed QE2
expectations from $1 trillion to $500 billion, a likely
open-ended approach (of say $100 billion per month) should in
our view keep (the dollar) on a depreciation path," said Tom
Levinson, currency strategist at ING in a note to clients.
                                
 "An absence of BOJ asset purchases of a similar scale
together with USD/JPY's strong correlation with U.S. Treasury
yields will keep the former biased lower."
                                
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Multimedia report on run-up to the Fed meeting:
                                
http://link.reuters.com/pyb23q
                                
Top News-U.S. elections: http://link.reuters.com/fyq86p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 The widely expected outcome of U.S. midterm elections --
where the Republicans took control of the House of
Representatives while the Democrats were set to hang on to the
Senate -- also offered some support. [ID:nN03266983]
                                
 In other currencies, the Australian dollar <AUD=D4> slipped
0.3 percent at US$0.9968, retreating from a 28-year high above
parity after weak building sector data took some of the shine
off the currency. The Aussie had rallied on Tuesday after the
Australian central bank raised interest rates.
 (Additional reporting by Neal Armstrong in London; Editing by
James Dalgleish)