By Hideyuki Sano TOKYO (Reuters) - The dollar slipped near a five-week low against a basket of currencies on Tuesday with traders cautious ahead of a Federal Reserve policy meeting that may discuss the need for further easing. Few traders expect the Fed to apply another dose of quantitative easing (QE) just yet -- and the dollar could gain if that view proves correct. But some said the greenback was unlikely to gain any respite as the central bank would probably signal its readiness to take QE steps if needed, keeping expectations of more dollar-printing intact. "Ongoing speculation of the Fed embarking on another round of QE is keeping the U.S. dollar under the cosh," said Sue Trinh, senior currency strategist at RBC in Hong Kong. "I'm not sure the market's going to get too much resolution after the FOMC today. Even if they don't signal any imminent QE, the market's speculation is more focused on the next few months," she added. The dollar index fell 0.2 percent to 81.17 from 81.33 in late U.S. trade, edging near a five-week low of 80.865 hit last week. The dollar hugged a tight range against the yen as traders were wary of pushing the dollar too much lower after Japan intervened in the market last week for the first time in six years. The dollar stood at 85.55 yen, down 0.2 percent on the day and off its post-intervention high of 85.94 hit on Friday. More dollar selling by Japanese exporters is expected towards the 86 yen level before the end of September, when many Japanese exporters close their books. In terms of technicals, the dollar/yen's 55-day moving average, now around 85.85, has been a resistance point after Japan stepped into the market last Wednesday. It has another resitance point at around 86.26, where its daily ichimoku cloud lurks on charts. "Share prices are rising, so there's no strong reason to buy the yen at the moment. But on the other hand, there will be yen buying on any dips (by Japanese exporters)," said a trader at a major Japanese bank. The S&P 500 closed at a four-month high on Monday. The yen's rangebound trade since intervention has helped to bring down dollar/yen options' implied volatilities. Its one-week volatility dropped to around 10.65/12.05 percent after having shot up to close to 15 percent right after intervention. In short-dated options for up to two weeks, demand for dollar calls are stronger than dollar puts, meaning dollar calls are being traded at a premium over yen calls -- an unusual development as dollar puts are normally more expensive because of Japanese exporters' hedging demand. Option traders said dollar calls with strike prices of above 90 have been traded as some market players sought protection against a possible jump in the dollar in the event of intervention. The euro edged up 0.2 percent to $1.3090, less than a full cent below its five-week high around $1.3160 hit on Friday, despite renewed worries over some euro zone countries debt spooked investors. The common currency has resistance around $1.3220, its 200-day moving average. The Australian dollar stayed close to its two-year high of $0.9495 hit on Monday after Reserve Bank of Australia Governor Glenn Stevens suggested Australian interest rates would rise further. The Australian currency rose briefly to as high as $0.9480 after minutes of the RBA's September policy meeting showed the bank thinks interest rates are likely to rise. But the rally quickly dissipated as the Aussie had already jumped one percent on Monday following Stevens' comments. Talk of a large option barrier at around $0.9500 with expiry at the end of the month also capped the currency.
