* Dollar index hovering above five-week lows
* Euro again fails to break above $1.33 convincingly
* Aussie dollar, Swedish crown nurse losses
By Ian Chua
SYDNEY, July 31 (Reuters) - The dollar struggled to extend modest overnight gains early in Asia on Wednesday as investors trod cautiously ahead of the outcome of the Federal Reserve policy review that could see the central bank drive home a dovish message.
The dollar index, which tracks the greenback’s performance against a basket of major currencies, was steady at 81.855, having drifted up 0.2 percent on Tuesday.
The move came as the euro failed for a fourth time to break above $1.33 and as the dollar continued to recover from a one-month trough around 97.63 yen plumbed on Monday.
The common currency was last at $1.3260, down from a six-week high around $1.3302, while the greenback fetched 98.08 yen.
Investors had knocked the dollar index to a five-week trough earlier this week as they bet the Fed would seek to reassure markets that interest rates would stay low for a long time, even if it started scaling back stimulus this year.
The Fed will release a policy statement at 1800 GMT, but there will no news conference by Chairman Ben Bernanke.
“Our economists expect the statement to emphasise the data-contingent nature of the plan rather than the provisional mid-2014 time frame for ending purchases that was discussed at the press conference,” analysts at BNP Paribas wrote in a note.
“A data-dependent tapering programme is likely to be of limited benefit for the dollar in the short-term, particularly because U.S. data has been quite mixed at best, a pattern which is likely to continue in the days ahead.”
Indeed, U.S. gross domestic product (GDP) data on Wednesday is expected to show growth slowed to an annualised rate of just 1.0 percent in the second quarter, hardly a sign of a runaway recovery. The influential ISM survey is due out Thursday and payrolls the day after.
Hot on the heels of the Fed, the European Central Bank and Bank of England will announce the outcome of their respective policy reviews on Thursday.
With these major risk events looming, traders said investors will likely stay on the sidelines.
Even the currency pariah that is the Australian dollar was given some respite. It was steady at $0.9068, but not far from a 34-month trough just below 90 U.S. cents struck a few weeks ago.
Against the euro, it was at A$1.4619 per euro versus a three-year low of A$1.4655 per euro set overnight.
Investors took aim at the currency on Tuesday as they saw a strong chance of an interest rate cut next week following comments from the head of the Reserve Bank of Australia.
Yet, RBA Governor Glenn Stevens said nothing new, reiterating that the Australian dollar could fall further and the inflation outlook offered scope for a cut in interest rates.
“Markets sometimes have short memories,” said Simon Smith, chief economist at FXPRO. “The low for July at 0.8999 remains the next downside focus for AUDUSD.”
The Swedish crown was also in the cross-hairs after data showed Sweden’s economy unexpectedly shrank in the second quarter.
The euro jumped 1.2 percent to a two-week high of 8.7006 crowns, before giving back a bit of ground to last trade at 8.6872 crowns.