* Yen hits 3-1/2-month low vs euro
* Obama speech reduces chances of U.S. strike against Syria
* Fed meeting in focus as markets await stimulus trim
NEW YORK, Sept 11 The dollar fell to near
two-week lows against major currencies on Wednesday as some
investors pared bets on a reduction in stimulus by the Federal
Reserve when it meets next week.
The yen rebounded against the dollar but remained close to a
seven-week low struck earlier. The yen hit a 3-1/2-month trough
versus the euro and a four-year low against sterling as easing
tensions over Syria dented demand for the safe-haven currency.
Traders said uncertainty about Syria and the Fed could keep
major currencies in a range. The Federal Open Market Committee
meets next Tuesday and Wednesday and doubts about a scaleback in
stimulus have risen following Friday's disappointing jobs data.
"I don't think there's a whole lot of room before
Wednesday's FOMC, but I do think there's going to be a little
bit of pressure on the dollar heading into that as more traders
take bets off of the likelihood of Fed taper," said Andrew Dilz,
foreign currency trader at Tempus Inc in Washington.
The dollar index, a measure of the greenback versus six
major currencies, slipped 0.4 percent to 81.493, having
hit a low of 81.445, the weakest since Aug. 29.
The euro rose 0.4 percent to $1.3313. The dollar fell
0.5 percent to 99.85 yen, after touching a session peak
of 100.60 yen, according to Reuters data, which was the
strongest since July 22.
Lower U.S. Treasury yields contributed to
pressure on the dollar, analysts said.
"It is a combination of things," said Paul Robson, currency
strategist at RBS Global Banking. "Tensions in Syria, which had
been negative for risk assets and supported the yen, have eased
a bit. Also global economic data over the last couple of weeks
has been relatively good."
President Barack Obama pledged on Tuesday to explore a
diplomatic plan from Russia to take away Syria's chemical
weapons, although he voiced skepticism and urged Americans to
support his threat to use force if needed.
A string of solid data out of China this week reinforced
expectations that the world's No. 2 economy is stabilizing after
more than two years of slowing growth.
The euro was down 0.2 percent at 132.93 yen,
having hit an intraday peak of 133.36, its highest since May 22.
Better-than-expected economic data and improving market
sentiment has helped the euro zone single currency lately, but
analysts at Morgan Stanley warned the euro's strength could be
short-lived and they remain sellers on any rallies.
"A break above the August high of (around) $1.3450 is
unlikely, and we would look to sell around the $1.3320 level,"
they wrote to clients.
Sterling was last up 0.5 percent to $1.5823, above
$1.58 for the first time since February, as the UK jobless rate
dropped, supporting bets that interest rates could be tightened
by the end of next year.
"British pound optimism has been warranted in recent weeks
as nearly every single economic data print since late May has
meshed with the notion that the Bank of England would remain
steady on its monetary policy course and move towards
normalizing stimulus," said Christopher Vecchio, currency
analyst at DailyFX in New York.