* U.S. GDP expected to show slight pick up in growth
* Market focus still on FOMC and likely QE next week
* Dollar index around 77.3 after sharp retreat
By Ian Chua
SYDNEY, Oct 29 (Reuters) - The U.S. dollar found a steadier footing against major currencies early in Asia on Friday, a day after posting its biggest fall in over a week as a fickle market turned its attention to looming U.S. growth data.
Due at 1230 GMT, the closely watched report is expected to show the world’s biggest economy grew 2.0 percent in the third quarter, which would still be too subdued to alter views of further stimulus from the Federal Reserve. [ID:nFEDAHEAD]
Dealers nervous, though, in case the data repeat the big upside surprise shown in UK GDP earlier this week which sent sterling flying on reduced expectations of easing there. The dollar looks set to end little changed after a choppy week as investors were still far from certain about how much money the Fed will spend to boost a flagging economy.
A New York Fed survey of dealers and investors included scenarios of up to $1 trillion, a figure larger than recent estimates. For details, see [ID:nN28172214].
That snapped a two-day dollar rally on Thursday, pushing the euro to the upper end of its recent broad range of about $1.3650-$1.40 and driving U.S. bond yields down.
“We had a little bit of trimming of U.S. dollar shorts earlier in the week and that was partitially reversed on the Fed survey, so we’re now caught in the middle,” said Grant Turley, strategist at ANZ.
“Expectations for U.S. GDP is not exactly high, so it’s hard to disappoint on the downside. In the short run, I’d favour trimming U.S. dollar shorts. I still think the dollar might get a little boost out of this.”
The euro was last at $1.3927 EUR=, compared with $1.3924 late in New York and well off Thursday's session low near $1.3750 session low. The 10-year Treasury note yield US10YT=RR was at 2.67 percent, having fallen from a one-month high of 2.73 percent set on Wednesday.
Against the Japanese currency, the dollar was little changed from late New York at around 81.00 yen JPY=, with solid barriers seen at 80.00.
There was little immediate reaction to a survey showing Japan’s manufacturing activity contracted for a second straight month in October and to data showing jobless rate in Japan fell in September. [ID:nTIYSLE61H] [ID:nTKC005938]
The dollar index .DXY, which tracks the greenback’s performance against six major currencies, was steady at 77.291 after falling 0.8 percent on Thursday, its biggest one-day percentage fall since Oct. 20.
The dollar has shed some 7 percent against major currencies since September, and some analysts say it’s due for a rally once the Fed reveals its easing plans.
The Australian dollar AUD=D4 also held near late New York levels at $0.9777, still recovering from a steep fall mid-week sparked by tame inflation numbers, which prompted the market to slash the chance of an interest rate hike next week.
“The AUD does, however, remain fundamentally attractive in its own right thanks to the ‘commodities + China’ cliche. A return to the long-term trend (around $0.75) is unlikely in the foreseeable future,” said Roland Randall, strategist at TD Securities.
“Our year-end target against the USD is parity and we see this level, or stronger, likely to persist into Q1 2011 as Australia continues to raise interest rates, China growth continues to recover and QE continues to debase the USD.”
Cautious investors are also expected to pull back before expected upheaval from Tuesday’s U.S. congression elections, which could bring significant shifts in U.S. legislative direction. A Republican surge looked set to drastically alter the balance of power in Washington.
(Editing by Wayne Cole)
Additional reporting by Steven C. Johnson in New York