Dollar steady but seen undermined by Fed QE

* Dollar steady but QE likely to lead to further selling * Open-ended approach from Fed the key to further weakness * Euro/dollar option expiries set to influence price action * United States set for political gridlock after midterms. (Releads, changes dateline, adds quotes, previous SYDNEY) By Neal Armstrong LONDON, Nov 3 (Reuters) - The dollar held steady on Wednesday as the Federal Reserve looked set to add more stimulus to spur a flagging recovery, a move analysts said would weigh on U.S. yields and ultimately put more pressure on the greenback. Traders said the market was unwilling to make new bets ahead of the U.S. central bank's policy decision due at around 1815 GMT, with option expiries expected to dictate price action. Markets are generally priced for the Fed initially to commit to buying at least $500 billion in Treasuries over five months, although much uncertainty surrounds the scope and pace of bond purchases. "There is uncertainty over the details of the Fed announcement but ultimately QE leads to lower yields and should mean the dollar goes down in the long-term," said Adrian Schmidt, currency strategist at Lloyds Banking Group. The dollar was flat versus a currency basket at 76.714. The euro was also steady around $1.4030, with traders highlighting option expiries at $1.3990, $1.4000 and $1.4050 which they said were likely to influence price action on the day. Against the yen, the dollar stood at 80.62 yen, unchanged on the day, as a Japanese holiday led to subdued trading, but the outlook was still skewed to the downside. "Irrespective of recent ratcheting down of Fed QE2 expectations from $1 trillion to $500 billion, a likely open-ended approach (of say $100 billion per month) should in our view keep (the dollar) on a depreciation path," said Tom Levinson, currency strategist at ING in a note to clients. "An absence of BOJ asset purchases of a similar scale together with USD/JPY's strong correlation with U.S. Treasury yields will keep the former biased lower." Dollar/yen hovered close to this week's 15-year low of 80.21, with all-time lows at 79.75 also close by, as the market stayed sensitive to potential for fresh Japanese intervention to stem the yen's rise. After a fall overnight, however, the U.S. dollar showed signs of steadying, with traders saying the Republicans' seizing control of the U.S. House of Representatives in midterm elections would provide some support. The Democrats were set to hang on to the Senate, according to television projections. Some analysts said a split Congress may act as a curb on government spending and lead to less government regulation. The high-flying Australian dollar retreated after a surprise 6.6 percent drop in building approvals, a day after the Reserve Bank lifted interest rates in a pre-emptive strike against inflation. The Aussie, which hit a 28-year high of $1.0025 on Tuesday, recoiled to $0.9979. Immediate support was seen at the $0.9910 area, Monday's high, a breach of which could see the currency back in consolidation mode between $0.9650 and $0.9850. (Additional reporting by Ian Chua in Sydney) 2010-11-03 11:19:23

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Kenyan shilling steady versus dollar, stocks down

NAIROBI (Reuters) - The Kenyan shilling held steady against the dollar on Wednesday, and traders said they expected it to firm in coming days, while most stocks on the Nairobi Stock Exchange's main share index were down. At 0855 GMT, commercial banks quoted the shilling at 80.45/55 to the dollar, unchanged from Tuesday's close. "There's not been much movement. Demand has remained light," said a senior trader at one commercial bank. The shilling is expected to trade in the 80.30-81.00 range in the next few days, traders said. The local currency is expected to get a further boost as the year draws to a close and importers demand fewer dollars. "We could see the local unit try to test new highs as importer appetite for the dollar diminishes," said Bank of Africa in a market report. "The local unit will continue being supported by strong inflows from tourism, tea and horticulture sectors, plus remittances from the diaspora and NGO (non governmental organisation) proceeds, all of which could give the local unit impetus to chart new levels." Latest central bank statistics show that in the first eight months of the year, total remittances stood at $402.9 million, up from $398.2 million in the same period in 2009. The government said last month that first half earnings from tourism rose 85 percent on last year, to 48.53 billion shillings, and that it was targeting earnings of 100 billion shillings for 2010, up from 62.46 billion shillings last year. On the Nairobi Stock Exchange, traders said share prices of most companies on the benchmark NSE-20 were down. "Most of the arrows are pointing downwards. There's a lot of profit taking," said Wycliffe Masinde, analyst at Kestrel Capital. The index closed 11.81 points, or 0.25 percent, higher at 4,686.98 on Tuesday. 2010-11-03 11:24:27

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