LONDON, Oct 28, 2010 (AFP) - The dollar steadied against major rival currencies on Thursday, amid speculation that the Federal Reserve's expected monetary easing may not be as big as expected, analysts said.
In trading here, the greenback dipped to 81.33 yen from 81.75 late in New York on Wednesday, pulling away from a 15-year low of 80.41 that was struck at the start of the week.
The European single currency meanwhile rose to 1.3828 dollars from 1.3767 dollars on Wednesday, winning some support from news that business confidence in the 16-nation eurozone hit a three-year high in October.
"The dollar was holding firm on short-covering" before the US Federal Reserve holds a policy meeting next week, said Daisuke Karakama, market economist at Mizuho Corporate Bank.
Market players "couldn't face the important event with huge short-positions on the dollar," he said, adding Japanese export companies' selling capped the dollar's rise.
The greenback has trended lower in recent weeks amid expectations the US central bank will soon renew large-scale asset purchases to boost the economy.
But there is growing uncertainty about the scope of the expected economic stimulus plan.
On Wednesday, The Wall Street Journal reported that the central bank will purchase bonds worth several hundred billion dollars over several months, less than hoped for by traders, which sent stocks lower.
The Bank of Japan (BoJ) at a policy meeting Thursday kept its key rate between zero and 0.1 percent in a widely expected move to help safeguard an economy mired in deflation and threatened by a strong yen.
The bank also decided to move forward its next policy board meeting to November 4-5, immediately following the Fed board meeting on November 2-3 meeting.
It positions the BoJ to cope with any sharp falls of the dollar that could come if the Fed Open Market Committee takes more drastic steps than expected, said Akito Fukunaga, chief rates strategist at Royal Bank of Scotland.
"The speculation is that this would enable the BoJ to quickly announce more easing steps of its own if there are volatile foreign exchange market moves immediately after the FOMC," he told Dow Jones Newswires.
In London on Thursday, the euro changed hands at 1.3828 dollars against 1.3767 dollars late in New York on Wednesday, at 112.47 yen (112.54), 0.8748 pounds (0.8727) and 1.3622 Swiss francs (1.3632).
The dollar stood at 81.33 yen (81.75) and 0.9852 Swiss francs (0.9902).
The pound was at 1.5804 dollars (1.5769).
On the London Bullion Market, the price of gold firmed to 1,327.43 dollars an ounce from 1,324.50 dollars an ounce late on Wednesday.
