* Dollar index falls 0.3 pct; weighed down by likely QE
* Fall in U.S. yields adding to pressure on greenback
* Dollar falls back vs yen after earlier spike
(Adds quote, updates prices)
By Neal Armstrong
LONDON, Nov 1 (Reuters) - The dollar fell against a basket
of currencies on Monday ahead of expected further U.S. monetary
easing, and fell back towards a 15-year low versus the yen after
an apparently erroneous spike prompted intervention jitters.
The greenback came under pressure against most major
currencies, albeit within recent ranges, as the market geared up
for the Federal Reserve to step up money printing after its
policy meeting on Nov. 2-3.
"The fact that the Fed will use further QE is a burden for
the dollar, whatever the volume they announce," said Ulrich
Leuchtmann, head of FX research at Commerzbank.
More dollar-selling is unlikely before the announcement,
however, and the recent $1.37/1.41 euro/dollar range should hold
for now, he added.
There is substantial event risk this week, leaving most
investors sidelined, traders said. As well as the Fed, there are
four other major policy decisions this week -- in Australia, the
euro zone, UK and Japan -- with key U.S. jobs data due Friday.
There is also great uncertainty about how much QE the Fed
will do. A recent Reuters poll found most economists expect the
Fed to buy $80 to $100 billion in assets per month, with totals
ranging widely from $250 billion to $2 trillion. []
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Analysts said the market remained fairly short dollars
heading into the Fed meeting but short-term players have
lightened some positions, the latest CFTC data showed. []
Some analysts believe dollar short positions have become
overstretched as investors priced in aggressive Fed QE, leaving
scope for a pullback for the dollar if the Fed announces QE at
the lower end of expectations. Others, however, believe any QE
will be negative for the dollar.
"I'm inclined to say there's a little too much negativity
priced into the dollar. But dollar shorts have been pared back,
which suggests people may have been scaling back their
expectations regarding the size of QE," said Jeremy Stretch,
currency strategist at CIBC.
By 1136 GMT, the greenback was down 0.3 percent against a
basket of six currencies at 77.028 <.DXY>, while the euro <EUR=>
was steady at $1.3953 after climbing to $1.4011 overnight.
The dollar was broadly under pressure after U.S. Treasury
yields on Friday ahead of the Fed's policy meeting. The yield on
U.S. two-year notes <US2YT=RR> fell near a record low.
DOLLAR/YEN SPIKE
After spiking more than one yen to 81.60 yen in early Asian
trade, the dollar gave up its gains and slid back within sight
of its 1995 record low of 79.75 yen, with talk of dollar sales
related to redemptions of U.S. Treasuries weighing it down.
The dollar was close to flat at 80.39 yen <JPY=> after
leaping from 80.35 yen to 81.60 yen <JPY=> very rapidly at about
0000 GMT. Before this, it had slipped to a 15-year low of 80.21.
Dealers said the spike made many suspect possible Japanese
intervention, but it quickly gave up gains as talk circulated
that the spike was caused by a miss-hit or technical glitch.
With the dollar close to the 80.00 yen level some see as a
possible threshold for intervention, the sudden rise prompted
others to jump on the move, sending the dollar even higher.
The Australian dollar <AUD=D4> was up 0.6 percent at
$0.9890, buoyed by strong data from China, the biggest buyer of
Australian commodities. []
Australia's central bank is expected to leave rates on hold
on Tuesday following recent below-forecast inflation data, but
there is a risk of a 25 basis point hike. []
(Additional reporting by Jessica Mortimer; editing by Stephen
Nisbet)
