* Dollar drifts off nine-month trough versus currency basket
* Move seen driven by position adjustment
* Fed expected to maintain massive stimulus programme
* RBA governor has another go at talking down the AUD
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Oct 29 The dollar inched up on
Tuesday, but stayed near a nine-month trough as investors bet
the Federal Reserve this week will set the course for its
massive stimulus programme to be maintained into early next
The dollar index edged up slightly to 79.388.
However, it remained not far off Friday's 78.998 - a low that
hadn't been seen since Feb. 1.
A break there could pave the way for a test of this year's
trough of 78.918 and then the September 2012 low of 78.601.
Traders said the market lacked conviction and moves were
driven more by flows and position adjustments ahead of the Fed
policy meeting on Tuesday and Wednesday than by fundamentals.
Indeed, investors would probably have sold the dollar if
they went only by the latest string of data, which suggested a
flagging U.S. economy.
Figures on Tuesday showed U.S. manufacturing output barely
rose in September and contracts to buy previously-owned homes
recorded their largest drop in nearly 3-1/2 years.
"The dollar's ability to gain against this backdrop likely
reflects positioning, with USD shorts having built up quickly in
October according to our metrics," analysts at BNP Paribas wrote
in a client note.
That has left the dollar increasingly less vulnerable to
negative news and with more scope to rally if data begins to
beat expectations again, they added.
Traders also said it is unlikely the dollar would react too
negatively should the Fed choose to wait for more evidence of
how badly Washington's budget battle hurt the U.S. economy
before deciding on whether to reduce stimulus.
The dollar index has fallen about 1 percent this month,
adding to a 2.3 percent slide in September.
One of the key beneficiaries of the dollar's decline has
been the euro, which as recently as Friday hit its highest since
November 2011 at $1.3833.
The euro slipped 0.1 percent to $1.3778. Traders see chart
resistance around $1.3800/70 with a convincing break there
setting the scene for a retest of the October 2011 peak of
Sterling touched its lowest level in nearly two weeks due to
stop-loss selling, traders said.
The pound eased 0.3 percent to $1.6089. It fell to
$1.6063 earlier on Tuesday, its lowest level since Oct. 17.
Against the yen, the dollar eased 0.1 percent to 97.55 yen
, but stayed above a two-week low of 96.94 yen set on
The U.S. jobs data for October, due on Nov. 8, may be a
bigger key for the dollar's near-term outlook than this week's
Fed meeting, said a trader for a European bank in Tokyo.
"If the jobs data is weak and leads to renewed
dollar-selling, the dollar could drop to levels below 96.50
yen," the trader said.
The Australian dollar retreated after the head of
Australia's central bank again tried to talk down the currency.
Reserve Bank of Australia Governor Glenn Stevens said it was
likely the Aussie dollar would fall materially in the future
given the country's declining terms of trade, a shift that would
be welcomed by the country's exporters.
The Australian dollar fell 0.6 percent to $0.9519.
Last Wednesday, the Aussie hit $0.9758, its highest level since