FOREX-Dollar inches off post-Fed lows, near-term outlook bleak
* Dollar's selloff loses steam but index still near 7-mth lows
* Upbeat U.S. data helps dollar marginally
* German election outcome this weekend key for euro
* Yen gets respite after sliding on Fed-inspired risk rally
By Anooja Debnath
LONDON, Sept 20 (Reuters) - The dollar edged off a seven-month low against a basket of currencies on Friday after investors unwound some negative trades put on after the Federal Reserve's surprise decision to maintain its bond-buying stimulus.
Although the dollar saw marginal gains, also due to above-forecast U.S. data, analysts said the greenback was likely to be weighed down in coming days by uncertainty over Fed policy.
The dollar index was flat at 80.321, a little above Wednesday's seven-month trough of 80.060.
"I don't see any recovery in the dollar just yet. FX markets didn't react too much to the positive U.S. data. That shows there is still a lot of concern about the Fed's future monetary policy," said Lutz Karpowitz, currency analyst at Commerzbank.
Thursday's U.S. data suggested rising market rates, which had concerned the Fed, were weighing only modestly on the economy. The upbeat numbers were likely to keep traders speculating about the timing of the Fed's expected stimulus tapering.
The euro held steady at $1.3533, after having hit a 7-1/2 month high of $1.3569 on Thursday.
Analysts said the euro could see some marginal impact from Germany's general election on Sunday.
Chancellor Angela Merkel looks to secure a third term but there are doubts she will be able to maintain her centre-right coalition, which could complicate her euro zone policy.
The dollar eased 0.2 percent to 99.26 yen. A trader for a Japanese bank in Singapore said there was talk of dollar-selling by Japanese exporters earlier on Friday.
The yen sold off broadly on Thursday as risky assets rallied after the Fed's decision. Investors tend to sell the yen in favour of higher-yielding assets when risk appetite is strong.
The Japanese currency, however, stayed close to lows hit on Thursday, including a three-month low versus the Australian dollar, a near four-year low against the euro and a 23-year trough versus the Swiss franc.
"Cross/yen pairs have risen on the back of (improved) risk appetite," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
Just how long such moves might last is unclear, given the possibility that the Fed could still start to taper its monetary stimulus within the next few months, Okagawa said.
"When we get close to the FOMC meeting in October and December, there will be debate over when they are going to do it and by how much," he said, adding that such uncertainty could cause markets to fluctuate.
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