FTSE led lower by Aberdeen, stays in tight pre-Fed range
* FTSE 100 down 0.2 pct
* Aberdeen AM the top faller on analyst target cut
* Smiths Group buoyed by special dividend (Adds closing prices)
By Alistair Smout and Simon Jessop
LONDON, Sept 18 (Reuters) - Britain's top share index was led lower by Aberdeen Asset Management on Wednesday but stayed in the tight trading range set over the previous week as many traders opted to wait for a steer on U.S. monetary policy.
The blue-chip FTSE 100 closed down 0.2 percent, or 11.35 points, at 6,558.82 points - towards the lower end of the day's range but within the roughly 100 point open/close range the index has traded since Sept. 10.
Keeping sentiment in check throughout the day was an impending meeting of the U.S. Federal Reserve, which is widely expected to reduce its $85 billion in monthly asset purchases - Reuters polls suggest by $10 billion - after UK markets close.
"The overall market reaction is likely to be muted if the Fed tapers by an amount that is within the $10 billion to $20 billion range," said Abi Oladimeji, head of investment strategy at UK firm Thomas Miller Investment.
"When all is said and done, it is the case that monetary policy remains relatively loose and broadly supportive of risk assets."
Given what was in the price, it would take a scaling back of $25 billion to be "market negative", a London-based trader at a U.S. investment bank said, "but recent data would argue against that".
Of more importance, he added, will be what the bank says about its plans to normalise monetary policy still further in the coming months.
The easy money policy of the Fed and other central banks has been a key plank of the support for equity markets globally and contributed to a 11 percent year-to-date gain for the FTSE 100.
Leading fallers across the broader index in volume two times its 90-day daily average was fund management company Aberdeen AM, which fell 3.5 percent after investment bank Morgan Stanley cut its price target on the stock, traders said.
The bank cut its earnings per share forecasts on the company by 6 percent and reduced its target price to 407 pence from 435 pence. Aberdeen closed at 364 pence.
Among the most in-demand stocks to buy, meanwhile, was hi-tech engineering company Smiths Group, which rose 2.6 percent after surprised markets with a special dividend.
"The FY13 results appear broadly in-line with expectations, but there is a special dividend of 30 pence that is likely to be well-received," analysts at Jefferies said in a note. (Additional reporting by Sudip Kar-Gupta and Blaise Robinson; editing by Ron Askew)
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