FOREX-Dollar at 1-week high as markets priced for Fed to hold policy
* Dollar index at one-week highs as USD shorts trimmed
* Markets priced for Fed to stay the course on stimulus
* Aussie nurses heavy losses after RBA's latest attempt at talking it down
By Ian Chua
SYDNEY, Oct 30 (Reuters) - The dollar traded at one-week highs against a basket of major currencies early in Asia on Wednesday as investors further trimmed bearish positions ahead of the outcome of the Federal Reserve policy meeting.
Investors had sold the greenback heavily in the run up to the Oct 29-30 meeting on growing expectations the U.S. central bank will maintain its massive bond-buying stimulus programme through to early next year.
As is usual after such a decisive move, investors decided to book some profits ahead of the Fed's decision due 1800 GMT.
The dollar index last stood at 79.618 , having climbed 0.5 percent on Tuesday in its biggest one-day rise in three weeks. Just last Friday, it had plumbed a nine-month low at 78.998.
"Fed meetings have not been friendly to the USD this year, with the dollar weakening following every meeting in 2013 with the exception of June," analysts at BNP Paribas wrote in a client note.
"However, with markets already having adjusted to a much more dovish view on the Fed outlook heading into today's meeting, we think the USD is likely to hold up better this time."
The euro slipped to $1.3748, pulling further away from a 23-month peak of $1.3833 set just a few days ago.
Its decline came even after European Central Bank Governing Council member Ewald Nowotny said there is no reason for the ECB to intervene and weaken the euro.
But traders said the currency's repeated failure to cleanly break above $1.3800 had made it vulnerable to a correction. Since September, the common currency has gained roughly 7 U.S. cents.
Against the yen, the dollar hovered near a one-week high around 98.28 set overnight, while the euro was also not far off a one-week peak of 135.19 scaled Tuesday.
A notable mover overnight was the Australian dollar, which suffered a steep fall following the Reserve Bank of Australia's latest attempt at talking down the currency.
The Aussie last traded at $0.9480 following a 0.9 percent drop on Tuesday to a 2-1/2 week low.
Immediate support is seen around $0.9410, the 38.2 percent retracement of its Aug-Oct rally. A break there will pave the way for a deeper correction.
Apart from Japan's industrial production data, there is little in the way of major economic news out of Asia.
On Tuesday, the Chinese central bank sought to reassure money market traders that a spike in short-term interest rates does not signal a dramatic tightening of liquidity, in an apparent move to avoid a repeat of a credit panic that roiled markets in June.
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